Farm owner loses dispute after miscommunication causes disclosure failure

A complainant who lodged a claim relating to fire damage to his farm will not be compensated for the losses after it was revealed that he failed to inform his insurer that the property had sustained pre-existing bushfire damage.

The claimant engaged with his broker to add the farm to his business insurance policy in November 2019. Suncorp agreed to add the site to the policy on December 20 2019 and backdated cover from October 19 2019, when the policy was issued.

On June 4 2020, the owner filed a claim with the insurer for property damage and a loss of earnings after a fire at the farm.

Suncorp declined the claim, saying the complainant failed to inform it that the farm suffered damage from a bushfire on December 4 2019. The insurer said it would not have offered the policy if it had been aware of the farm’s pre-existing condition.

The farm owner maintained that the claim should have been accepted, saying he did not know that the fire damaged the property when it was added to the policy.

The insurer presented the Australian Financial Complaints Authority (AFCA) panel with Facebook posts from the claimant on December 5 commenting on bushfire activity that it says showed he was “more likely than not aware of the significantly deteriorated condition of the premises”.

“We probably lost the farm today…,” the complainant said in one of his Facebook posts.

The man said that he spoke with his broker on January 4 2020, to establish “a likely timeline of the fire” and that he “did not know for sure” if the property was burnt until later.

The panel relied on the submitted Facebook posts for its determination, saying that the insured was aware that the property was “probably lost” and should have relayed the information to Suncorp before the cover was enacted.

It acknowledged that the complainant engaged with his broker on November 26 2019, before the bushfire, to apply for cover, but said that the cover only came into effect when the broker applied for the policy on December 20.

“The broker, as the complainant’s agent, did not tell the insurer Premises 2 was ‘probably’ lost to the bushfire when applying for cover for this property,” it said.

“This was a breach of the complainant’s duty of disclosure.”

AFCA noted that the claimant had not informed his broker about the fire because he was under the impression that the policy had already been enacted.

“Regardless of the reason why this was not communicated to his broker, it does not change that there has been a breach of the complainant’s duty of disclosure when applying for the insurance policy,” it said.

The decision agreed that Suncorp would not have covered the property if it had been aware of the damage and entitled it to reduce the liability to nil.

The farm owner lodged separate complaints against his broker, which was outside the scope of the determination.

Click here for the ruling.