A recent case considered the Australian Financial Complaints Authority (ACFA) involved a dispute about whether a tenant of a property subject to fire damage could rely on an insurance claim to avoid being liable for damage caused to his rental property.

The tenant was fixing his vintage vehicle when it caught fire, which caused significant damage to the property. The property owner then sent demands that the tenant pay $786 000 for damage to the property

The tenant held a ‘special vehicle policy’ for third party liability with the NRMA and sought to be indemnified under this policy against the claim. However, this was denied by the NRMA on the basis that the policy only extended to the use of the vehicle and not damage that was in the tenant’s physical and legal control – primarily because ‘welding’ on the vehicle did not constitute ‘using’ it.

Overall, the AFCA found that the NRMA was entitled to deny the insurance claim as the Policy clearly excluded accidental damage to property that was in the tenant’s physical and legal control. This case demonstrates that insurance policies will not cover all instances of loss or damage, particularly if they are preventable.

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