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Homeowners lose dispute after 'complete ruination' by squatters

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IAG has won a claim dispute with the owners of a house declared unfit for human habitation and described by neighbours as sliding into "gradual and complete ruination” due to squatting by “drug addicts, homeless people and derelicts”.

The local council ordered the owners, who left the insured property vacant from 2015, to demolish the property in mid 2019.

Weeks before, the owners lodged a claim for damage to the house. IAG declined it as the policy excluded cover for damage that occurred because the home was left unoccupied and not maintained.

The policyholders said they were not able to do more because the property was unsafe, the house was littered with broken glass and used syringes, and the squatters were aggressive when confronted.

The council inspector found all windows broken or boarded up, missing doors, collapsed ceilings, no working laundry, bathroom or cooking facilities and no electrical supply. Photographs presented to the Australian Financial Complaints Authority (AFCA) showed walls partially demolished and a shopping cart inside the home.

AFCA noted the insured property was damaged by numerous acts of theft and vandalism between the time of a previous claim, which was settled by IAG in November 2016, and June 2019, when the new claim for damage to the same property was lodged.

“Each of these acts was an insured event under the policy. However, the damage occurred because the property was left unoccupied and not maintained. The policy excludes cover in these circumstances,” AFCA said.

“The home was damaged by squatters, who entered the home because it was unoccupied and was not secure. Therefore, the act could reasonably be regarded as being capable of causing or contributing to the loss.”

IAG had offered to settle the dispute by paying $1500. The owners declined that offer and AFCA said IAG was not required to reinstate it.

The policy terms stated it did not cover damage if a home was unoccupied for 60 consecutive days or more and that the policyholder must maintain a lived-in state by keeping the garden tidy, organising weekly checks, and maintaining good repair and condition so the home was watertight, structurally sound and secure.

“The damage occurred because the home was left unoccupied and was not maintained in good repair and condition. Therefore, the above exclusions apply to the claim,” AFCA said.

In August 2015, tenants vacated the house and it was not re-let. In February 2016, the owners lodged a claim for damage to the house and IAG found it had been maliciously damaged. Squatters interfered and IAG builders refused to complete repairs, so IAG settled the claim by paying the cost of repairs to the owners.

In June 2019, they lodged the new claim and IAG’s builder said the house was in such poor condition that it could not be repaired.

Aerial photographs of the property during the years it was vacant revealed removal of temporary fencing, as well as a water tank, solar panels and some roof tiles, and debris in the back yard, overgrown grass, and the back yard black from fire

The owners said they contacted police many times to remove squatters but they returned afterwards. They did not live near the property and had only recently inspected it and discovered the damage, as they felt unsafe.

They hired private security guards to patrol the property in 2016 and paid for temporary fencing, performing maintenance work such as grass trimming and general cleaning “when it was safe to do so”. In January 2017, police arrested someone for burglary at the property, they said, and in February 2019 police received calls from multiple people reporting a fire at the property.

AFCA said it was not satisfied that leaving the property unoccupied and unmaintained was ‘necessary to protect the safety of a person’, which might have overridden the exclusion.

“Paying private security firms to patrol the vacant property regularly would have been expensive, but this does not relieve the complainants of their responsibility to secure and maintain the property,” it said.

Between 2016 and 2019, there was no record of the property being inspected, the complainants did not record or report any damage, there was no record of any reports being made to police and there was no record of any attempt to secure, maintain, or repair the property, other an invoice for removal of asbestos.

“The panel is not satisfied that it was not reasonably possible for the complainants to do anything other than leave the property unoccupied and allow it to deteriorate,” AFCA said.

AFCA also said IAG did not owe compensation for its warning that if a property continued to be damaged by squatters, a policyholder may be "taken off risk".

“This was true, and not misleading,” AFCA said. “Stress and inconvenience was caused by the property damage that led to the claim, not by the insurer mishandling the claim.”

See the full ruling here