According to Auto & General Services, it denied the claim for flood damage because the homeowner failed to disclose that he had been running an air conditioner and refrigerator retail business from the shed. The insurer pointed out that during the most recent policy renewal, the homeowner confirmed that no part of the property was used for business activities or for buying, selling, or storing business products or equipment.
The homeowner admitted to operating a business out of the shed but argued that he was not required to disclose the details because the policy specifically excluded coverage for business and farming structures, including sheds. He emphasized that the policy referred to the insured dwelling as a "freestanding house" and that any losses to the shed were covered by a separate business insurance policy.
The Australian Financial Complaints Authority (AFCA) sided with the homeowner, stating that the home and contents policy did not cover the shed and it was fair for him not to disclose the business. AFCA ruled that when the homeowner answered the insurer's question about whether any part of the "property" was being used as a business premises, he understood the question to refer only to the freestanding residential dwelling where he lived. AFCA also noted that the certificate of insurance specifically mentioned the freestanding home and did not include any reference to outbuildings or sheds.
As a result of the ruling, Auto & General is now required to accept the claim and appoint a qualified expert to prepare a scope of works for repairs to the insured property. The insurer must arrange and complete the repairs or provide a cash settlement with a 15% contingency. AFCA has also instructed Auto & General to assess the homeowner's entitlement to temporary accommodation benefits and reinstate his policy.
