The industry ombudsman has allowed IAG to pause a claim decision on a property damaged by tenants growing cannabis until police finish their inquiries.  

Officers discovered the drug operation in May 2024 and the building, along with seven others owned by the landlord claimant, became part of an investigation.

Police identified the landlord as a “subject of interest” and seized his personal documents, and electronic and communication devices.

The claimant argued IAG should not indefinitely delay a payout for the damage, because he had not been charged with an offence.

But the insurer said it could not make a decision until the investigation was completed.  

In its dispute ruling, the Australian Financial Complaints Authority agreed it was fair for IAG to wait on its decision, because the police findings could answer key questions around policy coverage.

It also noted “unusual” factors warranting further investigation, including why the complainant claimed for only one property despite several being damaged; and IAG’s suggestion he made a previous claim under similar circumstances.

“If the confiscated information or the investigation outcome establishes the complainant knew about or consented to the cannabis cultivation, the policy exclusion for deliberate or unlawful acts done with consent would apply,” an AFCA ombudsman said.  

“Since the police investigation is ongoing and the police have potentially critical evidence in their possession, the insurer has been deprived of information necessary to reach an informed claim decision.

“In these circumstances, I consider it fair for the insurer to withhold its claim decision until the police investigation is concluded.”  

The authority recommended IAG periodically contact police for updates. Once the investigation was completed or the complainant was no longer a suspect, the insurer was to gather relevant information and reach a decision within 10 days.  

See the ruling here.