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Homeowner wins disclosure dispute over business in farm shed

A property owner whose home was flooded has successfully overturned his insurer’s decision to deny his claim after it alleged that he breached his policy terms by failing to disclose a business operation. 

Auto & General Services says it declined the insured’s flood damage claim because of the insured’s non-disclosure of an air conditioner and refrigerator retailer he had been running from a farm shed on the property.

The insurer notes that the complainant had confirmed that no part of the property had been used as a “business premises” or for “buying, selling or storing any business products, services or equipment” during his most recent policy renewal. 

The claimant acknowledged that he was running a business out of the shed but argued that he was not required to disclose information about the operation because the policy excluded cover for business or farming structures, which included sheds.

He highlights that the renewal notice referred to the insured dwelling as a “freestanding house” and that he did not claim for losses to the farm shed as it had been insured with a separate business insurance policy. 

The Australian Financial Complaints Authority (AFCA) agreed with the complainant’s assessment that the relevant home and contents policy did not cover the shed and accepted that it was fair for him not to disclose the details about the business. 

“When the complainant answered the above question regarding whether any part of the ‘property’ was being used as a business premises, I accept the complainant considered he was answering for the freestanding residential dwelling where he lived,” AFCA said.

“The COI referred only to the freestanding home. It did not include outbuildings or shed.

“Even if ‘property’ could arguably include such structures, a reasonable person would limit this to property that is being insured under the policy.

“I am therefore not satisfied, based on the information provided, that a reasonable person in the complainant’s circumstances would have disclosed the business from the shed in answer to the insurer’s question.”

The ruling required Auto & General to accept the claim and appoint a qualified expert to prepare a scope of works for repairs to the insured property.

It says the insurer should arrange and complete repairs or offer a 15% contingency if it chooses to cash settle the claim.

AFCA also required Auto & General to assess the claimant’s entitlement to temporary accommodation benefits and reinstate his policy.

Click here for the ruling.