The incident occurred in December 2021 when a fire broke out at the investment property. The landlord had purchased an insurance policy for the property just a month prior, covering it for approximately $390,000.
Suncorp, the insurer, conducted investigations and determined that the fire was caused by an illegal electrical connection between the building's power supply and a cannabis farm set-up. Their forensic fire scene investigator, referred to as PG, concluded that the faulty connection led to a short circuit or excessive heat.
Suncorp also relied on evidence from the police officer who investigated the fire, confirming that it was indeed caused by the illegal drug operation.
The insurer cited a policy exclusion that excludes losses resulting from the use or existence of illegal drugs, emphasizing that the cannabis farm set-up was used for manufacturing and storing cannabis.
The landlord argued that it was unfair to decline the claim, as she lived in a different state and was unaware of the tenant's activities. Additionally, she claimed that the policy's illegal drug exclusion was too broad and ambiguous, making it difficult to determine coverage.
The Australian Financial Complaints Authority (AFCA) panel acknowledged that the policy exclusion could have been better worded for improved readability but concluded that it was applicable in this case. They stated, "The proximate cause of the fire was the tenant's illegal cannabis cultivation. Whether the exclusion applies is not dependent on the complainant's knowledge of the illegal activities."
The complainant also questioned the accuracy of PG's report, arguing that it did not conclusively determine the actual cause of the fire. However, the panel found PG's findings to be detailed and in line with the views of the investigating police officer.
Overall, the AFCA panel determined that the insurer was entitled to rely on the illegal drugs exclusion to deny the claim due to the evidence provided.
To read the full ruling, click here.
