Musa experienced a fire at his residence and subsequently submitted an insurance claim. The insurer initially rejected the claim because the insured premises had been declared a dwelling, but the adjuster’s inspection revealed that the property was also being used to manufacture food products.

Following Musa’s appeal, the insurer reviewed the claim and extended a goodwill offer; however, Musa remained dissatisfied with the amount and subsequently referred the dispute to FMOS.

FINDINGS

The policy had been in force since 2016, and evidence showed that the agent had informed the insurer that the premises would be used both as a dwelling and for manufacturing and packing chilli sauce. In 2018, when the insured’s son took over the business, a second policy covering stock and equipment at the same premises was issued.

It was noted that the insurer’s system should have identified the dual-purpose use of the premises, and therefore, it would be unjust to reject the claim on the grounds of misrepresentation.

Furthermore, the agent had declared the intended use to the best of their knowledge, and the responsibility for correctly classifying the occupancy and applying the appropriate premium rested with the underwriter, as all relevant information had been provided.

The case manager also highlighted that the complainant needs to be aware that the policy operated on an indemnity basis, which required depreciation for wear and tear to be applied in calculating the revised offer.

OUTCOME

Based on these considerations, the case manager recommended that the insurer review its decision. The insurer subsequently reassessed the matter, issued a revised offer, and the complainant accepted the settlement, and the case was amicably resolved.