A landlord in Queensland who submitted an insurance claim for damage to a holiday unit after discovering a tenant’s decomposing body has lost a dispute with Suncorp.

The landlord, who held a Suncorp investor home and contents insurance policy, said the damage was so severe and difficult to rectify that the unit was a total loss.

The police reported the death as "undetermined" and the landlord said murder or suicide could not be ruled out, which should fall within the policy’s “vandalism and malicious damage by tenants or their guests” coverage.

Suncorp declined the claim, saying the death was accidental and the landlord’s broker had not selected optional accidental cover.

The Australian Financial Complaints Authority (AFCA) ruled the damage was not covered and that Suncorp acted reasonably and fairly in assessing the claim.

“There is no doubt that the insured has suffered trauma and has had to deal with a horrible situation by virtue of the nature of the circumstances which have given rise to the claim,” AFCA said.

“The available information suggests the tenant died of natural causes and the damage to the property that followed was accidental in that it was unintended and unexpected.

“The only way the policy would cover the damage suffered by the complainant is the optional cover for 'accidental damage'. As this option was not taken by the complainant, the insurer is entitled to decline the claim.”

AFCA said arguments raised by the landlord and broker that the claim should be covered under the theft or vandalism sections of the policy “could not be sustained”.

The landlord’s broker elected not to include the accidental damage option, believing it not available for this type of risk. Suncorp said accidental damage was offered and the policy disclosure statement included that option.

“It is unclear why the broker would not have thought this was available,” AFCA said. “The certificate of insurance clearly states that optional accidental cover was not selected. There would have been the opportunity to select this on renewal of the policy.”

The landlord submitted a Closing Statement document stating Suncorp removed the opportunity to take out the optional cover for accidental damage.

“If this is the case the precise circumstances by which this happened are unclear. In any event this was plainly a matter on which the broker was available to give advice as to alternative policies available in the marketplace,” AFCA said.

The landlord also argued that the policy wording “theft and damage caused by tenants or their guests is covered” implied it would generally cover any damage caused by tenants as there was no additional wording to qualify that the damage must be caused by theft.

Since the damage to the holiday unit was a result of the physical decomposition of the body of the deceased tenant, the landlord said it should be covered under the policy.

AFCA said damage covered under that section would need to have been the result of a theft.

“This section of the policy does not apply,” it said. “The complainant has not established an insured event has occurred and the insurer is entitled to decline the claim on this basis.”

AFCA also denied compensation for inconvenience, saying Suncorp’s conduct was reasonable and never misleading.

“The key issue, that there was no coverage for accidental damage, was raised within five days of the claim being advised,” it said.

See the full ruling here.