Changes to the New Zealand Residential Tenancies Act and to PolicyComparison in Australia on methamphetamines.

The Residential Tenancies Amendment Bill (No 2) has just passed the Select Committee stage of the New Zealand legislative process. The Bill will change the Residential Tenancies Act (1986) in ways that will affect general insurers in the following areas:

  1. clarifying the state of the law regarding tenants’ responsibility for careless damage to property, including insurers’ rights of recovery;
  2. requiring landlords to disclose information about their insurance arrangements to tenants; and
  3. setting rules for testing properties for contaminants, including methamphetamine.

I will be watching carefully the final outcome of the process as I see rules for testing properties for methamphetamine being mandatory here. This as I have reported on a few times is becoming a big issue in Australia.

Following my last post, my colleagues at LMI conducted a review of our existing Landlords comparisons to see whether any addressed this. She found that currently only  2 policies provide cover for Chemical Contamination. One had  a sub-limit of $20,000 and the other $10,000.

Currently this is being shown under the “Additional Information” section of our comparison.

They then carried out a full review of all the Landlords wordings to see whether any one else offered similar cover and found that they don’t and none of them had specific exclusions relating to it.

As a result to assist users of our comparison service the team have added a new cell into our existing comparison template so that we can show the cover offered.  The cell is to be called “Chemical Contamination – Manufacturing Storage or Distribution of Any Controlled Drug” as the cover does not specifically mention methamphetamine’s but rather any controlled drug. Most Landlords wordings have a broader exclusion for pollutants which can include chemicals and we currently have an Exclusion cell for “Pollution other than Involving Animals, Terrorism or War and Nuclear Activities” in which we detail these exclusions.

The team did not stop there and checked the Home and Contents comparisons and wordings to see whether this is addressed anywhere in them and found that none of them have provided cover for chemical contamination. This did not surprise me as an occupier should know what is coming into their  house and if they allow such substances, it would be unfair to have the insurer pay for the clean up.

Regarding chemicals, the review showed that there is usually an exclusion for pollutants, which can include chemicals, and we put this in the existing exclusion cell – “Pollution other than Involving Animals, Terrorism or War and Nuclear Activities”. Chemicals are also commonly excluded when it comes to (a) Any process of cleaning involving the use of chemicals other than domestic household chemicals and/or (b) Contamination by chemical and/or biological agents, which results from an act of terrorism. Neither of these relate to the cover we are talking about.

The most common exclusions relating to drugs are:

  • Any property illegally in Insured’s possession stored in a dangerous and illegal way or any equipment connected with growing or creating any illegal substance
  • Liability arising from or in connection with or involving committing or attempting to commit a criminal offence including the manufacture distribution and/or supply of illegal substances or drugs
  • Liability and loss or damage when Insured is under the influence of an illegal substance or drug or loss or damage was caused or contributed to because Insured possessed supplied or consumed illegal substances or illegal drugs
  • Insured’s possession supply manufacture or consumption of any illegal substances or illegal drugs

We currently have an exclusion cell for “Use of Alcohol or Drugs” in which we place all the above mentioned exclusions.

I may offer more comment when the New Zealand Legislation goes through and or after we have completed a similar review on LMI comparisons.

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The difference between Home and Strata Insurance

Apartment BuildingsA number of insurance brokers have contacted me of late concerned that unit holders and body corporates are obtaining quotations from comparator sites and some new entrant direct insurers on their body corporate or their individual unit.

This of course is a nightmare situation as the cover afforded under a home building policy is totally different from a residential strata complex.

Issues such as common areas, liability coverage and a raft of others are specifically addressed by a strata insurance policy and provide much better coverage tailored to this form of accommodation.

I know of a number of complaints that have been lodged with ASIC on this issue, however it still remains unresolved. In the meantime, my strong advice is to only insure residential body corporate units under a residential strata policy.

If you are on the management committee you may well find yourself personally liable if the insurance does not adequately cover all the unit holders, not only for your own unit but the others where the unit holders have entrusted you to get it right!

Not all Directors and Officers Insurance coverage provides protection for inappropriate or inadequate insurance. Think of the personal risk to you not some perceived and possibly illusory saving in premium.

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Warning on Asbestos Imports

Since the beginning of 2004, Australia has had a complete ban on the importation, manufacture and use of asbestos and products containing asbestos.

As with some of the electrical wiring and insulated foam panels that are being imported from China, it has now been found that building materials, auto parts, crayons and other products imported into Australia from China, contain asbestos.

It is my understanding that under Chinese law, a product that contains less than 5% asbestos can be labelled “Asbestos free” when in fact the product is not. The use of this product can become a real risk to property owners, importers and tradesmen that purchase and install the products etc.

I will confine my comments in this blog to asbestos related products. Since the massive claims that arose out of the use of asbestos, it has become a blanket exclusion across home, business pack, liability and construction risk policies.

More recently, at least one insurer has an automatic decline on any building that contains asbestos. This is as I understand it, is being reviewed to become a referral and will be rated with the additional risk, however at this stage it is an exclusion.

As these products that are being imported are identified, a product recall will be called and if the importer does, as I suspect, immediately seek to go into liquidation, it will be left with the retailer or tradesmen that has sold the product to bear the cost in the first instance. This could have a crippling effect on those businesses.

It is always tempting to go for the cheapest option whether it be building materials, autoparts or general insurance. The reality is, you typically get what you pay for and that modest saving which was made, turns out to have created a massive uninsured exposure which could literally have life changing consequences.

I attach a copy of the Department of Immigration Border Protection notice #2016/13 on the subject of asbestos.

Brokers are urged to discuss this important topic with their Insureds.

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