The owners of a fire-damaged property – with the assistance of their broker – have prevailed in a claims dispute after the Australian Financial Complaints Authority (AFCA) ruled they did not misrepresent the type of materials that had been used to construct the walls. 
 
Hollard had declined the claim, saying the insureds failed to disclose the walls were built using asbestos on inception and renewal of the landlords home and contents policy, which was arranged by the broker. The AFCA ruling did not name the broker. 
 
In the online policy application form timber was selected from a list of drop-down options provided, which included asbestos and fibro. 
 
The insurer says but for the misrepresentation it would not have issued the policy as the risk did not fall within its underwriting guidelines. 
 
But AFCA, after reviewing submissions provided by the broker – who lodged the claim on behalf of the owners after the fire in November 2021 and represented them in the dispute proceedings – says parts of the online form were “arguably ambiguous” and ruled the insurer had failed to establish misrepresentation by the owners. 
 
AFCA says in the proposal form’s property details section, the drop-down box for selection of wall construction materials used did not ask for the main construction material. And it did not provide an option to select multiple construction materials. 
 
“The proposal drop-down screen does not appear to allow a party to describe multiple methods of construction,” AFCA says in its ruling. 
 
“It would have been clearer if the drop-down screen requested a description of the main construction material for the exterior walls. The drop-down screen is otherwise arguably ambiguous in its enquiry.” 
 
AFCA says it accepts that the owners would have been aware that the walls included fibro cement cladding. 
 
“However, given the ambiguity in the questions asked and limitations of the drop-down screen I am not satisfied that [they] had misrepresented the construction of the walls,” AFCA says. 
 
“As multiple construction materials could not be selected in the drop-down screen, to describe ‘walls’ as ‘timber’ was not misleading. 
 
“I am satisfied it was reasonable to describe one of the construction materials given the limitations on the drop-down screen.” 
 
AFCA says within 14 days of the owners accepting its ruling, the insurer is to appoint an independent engineer and independent builder to prepare a scope of works and a quote for the completion of the repairs. 
 
The insurer may then determine whether to repair the property in accordance with the terms of the policy or cash settle the claim. 
 
If the insurer determines to cash settle the claim the insurer should increase the quoted amount by 15% to cover for potential contingencies and transfer of risk through the repair process. The property’s sum insured is $257,500. 
 
Click here for the ruling.