A NSW woman whose farm shed kit was damaged in a bushfire before it could be constructed on a newly laid concrete slab has lost her claim dispute.

The woman bought the farm in July last year and later signed a contract to build the concrete slab and install the shed.

The slab went ahead in preparation on October 1 2019, and two weeks later she bought a farm property policy with an IAG brand IAL, via a broker.

The shed kit was delivered late that month and building works were set to start on November 4 last year but were delayed due to the bushfires. Their quote stated “please note as a bad fire season is expected there may be hold ups as we are a major contractor with the Rural Fire Service and the Forestry Corp of NSW”.

On November 12, a bushfire struck the woman’s farm and damaged the still unconstructed shed kit. She lodged a claim and also sought loss of rent.

IAL denied the claim, saying it only provided cover for farm buildings not building materials. IAL said a different “contract works cover” policy was required and the policy proposal had not been answered correctly.

The Australian Financial Complaints Authority (AFCA) agreed the farm shed kit materials could not be classified as a building.

AFCA also said the woman “did not disclose relevant matters to the insurer and breached her duty of disclosure” and that “on the balance of probabilities, the insurer would not have entered into a farm policy … had it known the true position”.

The policy proposal had asked “is the property undergoing renovations over $50,000 or under construction?”

The woman, through her broker, answered “no”, and the broker did not advise IAL that a slab had been constructed and the shed not yet erected.

“For reasons I cannot understand, the client answered 'no',” IAL’s underwriting manager said. “Had they answered correctly we would have advised the broker that we could not accept this under a farm policy.”

AFCA said the “responsibility is on the broker to advise the complainant of her duty of disclosure and provide the policy documents to her as their client”.

“It was the complainant’s broker who had control of suitable placement of cover. The panel accepts the insurer can only respond to cover as described to it.”

The woman brought a separate complaint against her broker.

AFCA said it was satisfied the question asked in the proposal was “clear and unambiguous”.

“The guidelines are clear. The insurer declines risks for buildings in the course of construction. As the slab had already been constructed for the farm shed kit, the panel is satisfied the insurer would not have entered into the insurance contract with the complainant had it known the true situation.

“It would not have been on risk when the bushfire damaged the property and is entitled to reduce its liability for the claim to nil.”

IAL agreed to cancel the policy, refund the premium and pay $5,000 compensation. It acknowledged there was an unusual and unexpected delay in relaying the final decision to the woman because it was making enquiries with the broker and its underwriters to complete its review.

See the full ruling here.