Question:
A client contacted the office to advise that the address for their contents insurance was changing, there were no changes made to the owner-occupied home at the time. It appears this was missed (we are unsure whether a discussion about the house occurred or not).
The house was then left unoccupied pending renovation (no notification to the insurer).
After five months of being unoccupied, the property was broken into, and malicious damage occurred.
The insurer has advised that they will not backdate acceptance of cover for the unoccupied house but agreed to cover the home as unoccupied moving forward. They will not cover the property for the damage sustained.
Our opinion is that had the insurer been notified at the time the contents insurance was changed, there would have been no issue in covering the property with standard unoccupancy clauses, and therefore the damage sustained should be covered.
Does this fit the bill for a prudent underwriter test? Do we have an argument to have the claim accepted?
Crossley Gates replies:
Most house policies expressly provide for an automatic suspension of cover when a house remains unoccupied for a stated period of time.
If the stated period expired during the term of the policy, the cover is solely determined by the correct application of the unoccupancy clause and not by the duty of disclosure before inception/renewal.
There is a school of thought that if the policy expressly addressed the happening of certain facts, there is no duty of disclosure relating to those facts - the policy already anticipates them and addresses them.
The prudent underwriter test is the test used to determine whether a fact is a material fact that must be disclosed. If a (theoretical) prudent underwriter would want to take it into account in deciding whether to offer cover or deciding the terms of that cover, the fact is material and must be disclosed.
