Landlord wins in dispute over drug contamination
InsuranceNews.com.au (18 March 2020)
A landlord has won a dispute with his insurer over a claim for damage to his property caused by methamphetamine contamination.
The Australian Financial Complaints Authority (AFCA) rejected Suncorp’s argument that the contamination falls within its policy exclusions for “biological, chemical and other pollutants or contaminants”.
The insurer argued the general exclusions are intended to cover any damage caused by chemicals or contaminants and should be read in terms of individual clauses. It says methamphetamine – a drug more commonly known as ice – is a chemical as well as a contaminant.
But AFCA disagreed, saying "it is not appropriate to give an exclusion a meaning other than its plain meaning”.
It says the general exclusions do not apply to the “passive act” of a tenant leading to contamination because of the use of an illegal substance.
“The proximate cause of the damage in this instance was not any threatened biological or chemical contaminant but the result of a tenant using methamphetamines,” AFCA says.
A portion of the policy exclusion refers to “actual or threatened events”, but in this dispute “no actual or threatened biological, chemical, or contaminant attack occurred to cause the contamination”.
Finding Suncorp liable to meet the complainant’s claim for methamphetamine contamination, the AFCA ombudsman accepts that the contamination was loss or damage that occurred without the complainant’s intent.
But “the general exclusions do not apply and the exclusion for chemical or other pollutant contaminants relates to outside forces, public unrest and other forms of attack. It would be unfair to apply it to accidental contamination from personal use.”
The complainant initially made a claim in May last year for malicious damage to the tenanted property but withdrew the claim as the repair bill was covered by the tenant’s bond.
But two months later the complainant notified Suncorp of contamination caused by the use of methamphetamine, rending the property unliveable. The insurer declined the claim.
AFCA says it will let Suncorp decide how it wants to settle the claim, as provided in the policy. Since no information was provided on the estimated repair cost, Suncorp was ordered to appoint an independent assessor or builder to prepare a report on the damage within 14 days of the complainant accepting the ruling.
Suncorp says it is committed to working with customers and AFCA to "provide fair outcomes".
"We may not always agree with AFCA’s decisions but we will continue to work proactively with them to resolve any points of dispute," a spokesman told insuranceNEWS.com.au.
Click here for the AFCA ruling.