A homeowner has successfully challenged her insurer’s decision to decline a storm damage claim over misrepresentation of the property’s condition, after a dispute ruling found she answered questions based on an “honestly held belief”. 

The complainant lodged the claim in February last year after a storm damaged the property in December 2021. 

Auto & General declined the claim following inspections from its builder and roofer, saying the complainant provided misleading information about the home’s condition when the policy was purchased. 

The insurer-appointed builder, referred to as LB, identified the property’s roof as severely rusted with holes and said the front patio “appeared to be constructed of second-hand materials,” with visible crafting issues.  

LB noted possible hail damage to the property’s roof and other exterior areas, which appeared to have been present for at least three months. 

Auto & General engaged with a roofer following LB’s findings, who identified damage to the property’s garage and dents in the roofing that they say were “consistent with hail strike”.  

It also flagged a pre-purchase inspection report that it says supports its contention that the home had not been “in good condition”. 

The insurer notes that the policyholder answered “yes” in response to a question on the policy application form asking, “Is the home in good condition?” It says this was an inaccurate statement. 

Auto & General also cites a statutory declaration from the insurer’s underwriter that says the home would have been deemed “unacceptable” for cover if it had been aware of its condition. 

However, the Australian Financial Complaints Authority (AFCA) panel raised issues with the insurer’s policy question, saying that it did not provide information to explain the term “in good condition” sufficiently. 

“The application form gives a definition of ‘good condition’, but it includes: ‘No leaks, holes, damage, rust, or wood rot’,” AFCA said. 

“The panel does not consider this definition can be considered literally, as most homes will have some sort of damage.

“It is not clear from this definition what sort of damage and how extensive it must be before it needs to be disclosed.” 

The panel notes that if a policyholder answers “no” to the question, the online form considers it a declaration that the home is not “structurally sound and watertight”, which it says applies a different meaning from the initial wording on the application form.  

“The application’s definition of ‘good condition’ says the home must have no damage of any kind, which is a much higher, if not impossible, standard than ‘structurally sound and watertight’,” AFCA said. 

“This has the potential to mislead and confuse consumers.” 

The panel accepted the complainant’s account that she answered the questions based on the pre-purchase report’s findings, which considered the property “in good condition” and only identified minor defects that it says were “expected for a building of this age and construction method”. 

AFCA also noted findings from LB’s report, which acknowledge that the homeowner would not have “reasonably been aware” of the property’s condition in relation to the event. 

“The panel accepts, on balance, the complainant represented the condition of the property based on an honestly held belief,” AFCA said. 

“The complainant has not breached her duty to take reasonable care not to make a misrepresentation. Therefore, there has not been a ‘relevant failure’”. 

The ruling requires Auto & General to accept the claim and reinstate the policy, pending the complainant’s repayment of premiums.  

Click here for the ruling.