IAG has won a dispute lodged by a commercial client whose claim for fire damage was denied on the basis the business failed to meet a number of conditions for cover, including ensuring there was no smoking on the premises.

The complainant, who took the dispute to the Australian Financial Complaints Authority (AFCA) to seek payment of $145,855.24 plus interest and legal fees, believed he should be indemnified for the loss.

He insisted there was no conclusive evidence that smoking by his employees caused the fire and that the insurer cannot rely on the “no smoking anywhere on the premises” condition to deny the claim.

But AFCA disagreed, pointing out the fire department had concluded in its report that the probable cause of the incident was discarded cigarette butts.

At least one employee the fire department spoke to as part of its investigation into the incident said staff smoked on the premises, contradicting the complainant’s submission that he had an anti-smoking policy in place.

“Given this available information, the panel is satisfied there was smoking on the premises,” AFCA said. “This breached the policy endorsement, which is a general condition of cover.

“On this basis, the insurer can deny the claim under the policy.”

AFCA also rejected the complainant’s argument that the policy conditions including the endorsements around fire safety procedures were “vague, ambiguous and equivocal” in the consequence of a breach.

The dispute mediator says the terms and conditions stated in the cover clearly outline a range of obligations that the policyholder must abide by. These include keeping the insured property in good condition and taking reasonable care to safeguard the premises such as preventing the risk of fire.

“Given this, the panel accepts the ‘no smoking anywhere on the premises’ is a general condition of cover,” AFCA ruled. “This is consistent with the context of the other endorsements as well as the language used in the policy’s general conditions.

“The provisions are not expressed as exclusions and should not be interpreted as such.”

Click here for the ruling.