The landlord's property was initially leased to a restaurant, a detail accurately reported at the policy's inception in 2019. However, by the 2023 renewal, the tenant had ceased restaurant operations, and the upper floor was being used for weekly religious meetings. This significant change was not communicated to the insurer, AIG.
In May 2023, AIG updated its underwriting guidelines, categorizing religious institutions as 'outside appetite' due to increased fire risks associated with arson attacks. Consequently, had the landlord disclosed the new tenant activities, AIG would have declined to renew the policy.
Following a theft incident, the landlord filed a claim, which AIG rejected, citing the failure to disclose the change in property use. AFCA upheld AIG's decision, stating that the insurer was entitled to reduce its liability to nil and decline the claim.
This case highlights the necessity for landlords to promptly inform their insurers of any changes in tenant activities. Accurate disclosure ensures that the property is adequately covered and prevents potential claim denials. Landlords should regularly review and update their insurance policies to reflect current property use, thereby safeguarding their investments and ensuring compliance with policy terms.
