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Insurer fails to prove misrepresentation despite inaccurate information from broker 

An insurer embroiled in a claim dispute with a business stock insurance policyholder, whose broker had provided inaccurate information about the roof of the building where the stock was held, has been ordered to indemnify the customer for losses suffered after a fire destroyed the premises. 

Hollard Insurance said it was not liable for the claimed loss as the policyholder failed to disclose, or misrepresented, the building roof type at inception of the policy. The policy provides cover for up to $550,000 and the policyholder estimates its loss at $734,928. 

The broker, who arranged the policy in April 2021, filled out the online application and described the roof type of the four-storey commercial building as “iron”. 

The broker, who later completed a Business Insurance Survey as required by the insurer, wrote “iron sheeting” in response to one of the questions about the building’s construction and style of roofing. 

It was only after the fire in March last year that it was realised the building’s roof was “clad with super six asbestos roof sheeting”. The policyholder had disputed the roof was asbestos but a fire report commissioned by Hollard after the fire confirmed the material type. 

Hollard said it would not have provided cover had it been aware the roof was constructed using asbestos and that the policyholder had an obligation to disclose it to the insurer. 

The insurer also said the policyholder could have used Google Maps to find out details about the roof type. Hollard provided Google Maps photos that showed the roof has a flat, grey appearance. 

But the Australian Financial Complaints Authority (AFCA) says the photos could suggest the roof was made of metal or iron-based material and disagreed with the insurer’s view the policyholder knew or ought to have known the roof was constructed using asbestos. 

AFCA says the insurer has failed to show the policyholder failed in its duty to disclose certain information and ruled Hollard must accept the claim. 

“There is no information to show the complainant believed there was any asbestos in the roof. The complainant did not misrepresent the roof’s condition,” AFCA says.  

AFCA says there will be times when an incorrect statement or the failure to answer a question will not be a misrepresentation and that this is outlined in section 26 of the Insurance Contracts Act. 

Section 26 says a misrepresentation will not have occurred if the statement is untrue, but it is based on the complainant’s belief, and is a belief a reasonable person in the circumstances would have also held, or a reasonable person in the circumstances could not be expected to know the statement was relevant to the insurer’s decision to offer insurance. 

AFCA ruled the insurer is required to indemnify the complainant for the claimed loss, pursuant to the terms of the policy. 

Click here for the ruling.