A landlord seeking $102,270 for theft and repair of malicious damage to a commercial rental property has been awarded $45,724 after a claim dispute with AIG Australia. 

The Australian Financial Complaints Authority deducted $56,546 – the additional premium owed to AIG to cover a building empty for 90 or more consecutive days, which the landlord had not arranged, despite advice from a broker to do so.  

The building owner, who was represented by their broker at the AFCA hearing, held a business insurance pack policy and lodged a claim in July last year after thieves broke in via a security gate. 

AIG declined the claim because the insured building had been unoccupied, which was excluded under the policy.  

The broker had contacted the owner and the managing agent before the theft regarding updating the insurer about having no tenants, the impact this may have on any claim and the option to request a higher level of cover for additional premium.

The owner chose not to act, and the unoccupied status was communicated to AIG only after the theft.

AFCA says AIG would have accepted the unoccupancy risk had the complainant informed it, and so it is fair to require it to accept the claim subject to charging the additional premium and conditions such as an excess.  

It says the "relevant act" under section 54 of the Insurance Contracts Act was failure to contact the insurer requesting written consent to cover the property while unoccupied – not leaving it empty for more than 90 days.

“I am not of the view that the complainant’s failure to request the insurer’s written consent ... can reasonably be regarded as being capable of causing or contributing to the malicious damage and theft event,” an AFCA ombudsman said.  

“The insurer cannot refuse to pay the claim by reason only of the post-contractual act, that is, by reason only of the complainant’s failure to seek its written consent. The insurer is, however, entitled to reduce its liability to the extent that it has been prejudiced.”

The dispute authority says AIG has not shown the extent of the prejudice was “equal to being able to limit its liability under the policy to nil. Rather, it is fair to accept the extent of the insurer’s liability, in this instance, is the additional premium that would have been applied to the policy had the complainant informed the insurer of the situation being unoccupied.” 

AFCA dismissed arguments from the building owner and broker that the property was partially occupied because the property manager drove past daily and tradies were completing maintenance work. They also tried to argue it was unfair to decline the claim because the theft occurred at the weekend, when the building would have been unoccupied even when tenanted. 

See the ruling here. 

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