A Hollard customer whose claim for fire damage was declined because his past criminal offences were not disclosed when his brokers arranged the business insurance policy has lost his dispute with the insurer.

The Australian Financial Complaints Authority (AFCA) says the customer breached his duty of disclosure as the available information showed the brokers were acting on his authority during the online application process for the policy, which was incepted in January 2019.

“This means any failure on their behalf will effectively be passed on the complainant,” AFCA says in its ruling of the dispute.

The complainant says he did not fail in his disclosure duty as he had passed on his criminal record to his principal broker, who then contacted another broker, identified as DU in the AFCA ruling, to arrange the policy with Hollard.

DU incorrectly answered “no” to a question during the application process that asked if the insured or any person to be insured under the policy has been charged with or convicted of any criminal offence in the last five years.

The complainant's offences in the five years before 2019 include two common assault charges for an offence in the previous year, one charge for threats to injure, endanger or harm for an offence in 2016 and one endanger life, health or safety charge for an offence in 2018.

The customer says he should not be held liable for the brokers’ dealings with the insurer, insisting it was them who failed to provide the insurer with the correct information.

But AFCA disagrees, ruling Hollard would not have agreed to offer cover if the information about the customer’s criminal history had been disclosed during the policy application process.

“The panel notes the disclosable criminal history in the five years prior to policy inception related to crimes involving violence,” AFCA says.

“Under the insurer’s underwriting guidelines, any crime that involves violence falls within an automatic decline.”

Hollard had rejected the claim - which was made after a fire broke out at the insured premises in December 2019 - after its investigation found the customer’s criminal history was not disclosed when the policy was arranged.

The insurer says it would never have insured the customer if his criminal history had been disclosed and its “prejudice” represents the full amount of the claim, as it would not have been on risk at the time of the fire.

To support its position, the insurer provided an extract of its underwriting guidelines together with a statement from its chief operating officer.

AFCA also says Hollard is not liable for the conduct of the customer’s principal broker and DU as they are not the insurer’s authorised representatives.

The customer had argued he made a successful claim under another business insurance policy with a different insurer that had been arranged by his principal broker, who did not pass on his criminal history.

AFCA says since the available information shows the principal broker may have been an authorised representative of this insurer, then "arguably [it] is responsible" for the broker's errors.

Click here for more from the ruling.