A homeowner who was sued by someone who fell outside his property has lost a bid to make his insurer cover his legal costs. 

The accident happened in April 2019 during construction of the man’s home, when his builder removed a section of footpath to install a gas line.

The person who fell alleged the path was left in a hazardous condition, without any warnings or protections. They sued the builder and local council over their injuries, and later added the homeowner to the lawsuit.

The property owner lodged a claim with Insurance Manufacturers of Australia on January 10 last year, seeking coverage for legal fees and any compensation he might be ordered to pay.

The insurer said its domestic home and contents policy did cover legal liability for bodily injuries, but it did not apply in these circumstances.  

It said its building insurance required an incident to take place either “in your home or at the site”, and it deemed the path to fall outside this area.  

The insurer said its contents cover responded to incidents “outside the site, but within Australia”, but noted it excluded liability arising from building work costing more than $50,000. The home construction was valued at $1.2 million.  

It told the property owner it was denying the claim on April 4 last year, just 20 days before his scheduled court mediation.  

The insurer conceded it was “disappointed in the time it took” to come to its decision, which “could and should have been quicker”.  

In a dispute ruling, the Australian Financial Complaints Authority backs the claim denial but has told Insurance Manufacturers of Australia to pay $4000 compensation for unreasonable and unexplained delays.  

“The complainant had to wait almost three months for the insurer’s claim decision, then had to appoint lawyers at short notice,” the authority said.

“This caused an unusual degree of stress, in addition to the stress and inconvenience the complainant would have suffered if the insurer denied the claim promptly.”  

See the ruling here.