Insurers criticized for seeking recovery from tenant after kitchen fire – is this reasonable?
Earlier this month the ABC ran an article advising that insurers had agreed not to seek recovery from tenants following an “accidental” fire which caused damage to the landlord’s insured property. See here.
In one of the examples, it shows a kitchen fire where whatever was on the stove caught fire. Typically this is due to someone walking away from the stove and oil overheating or the food being cooked catching fire. This used to be considered negligence on the person doing the cooking.
So what now constitutes an accident? Does the tenant not paying attention while reversing and driving through the garage door count as an ‘accident’? What about smoking while in bed and falling asleep and the bedding catching fire destroying the home?
While Choice and others are pushing insurers not seeking recovery, they are at the same time actively complaining about the affordability of general insurance.
The simple answer is that all tenants need to take out contents insurance and they would have been fine, with the vast majority of insurers having at least $10,000,000 liability coverage. No it would not protect them from damage caused while they were driving their car, but comprehensive or third party property damage insurance on their motor vehicle would protect them as well.
Consumerism has its place but at the end of the day, someone has to pay. All that will happen is that landlord and or strata insurance will go up in price due to the insurers inability to rely on historic rules of subrogation and this will then be passed on to tenants as increased rent. All tenants will be paying this for the actions of a few who are careless and who elect not to have the brains to insure their own assets and liability exposure.
So true Allan, my first thought when I read the article a week or so ago was the same, if the tenant had contents insurance liability would have come with it so what’s the problem. Perhaps residential tenancy agreements should contain clauses similar to Commercial agreements requiring the tenant to have liability insurance. Better yet make it compulsory for tenants to have liability insurance.
Gedday Alan – We have noticed that a lot of insurers’ house contents legal liability sections exclude ‘Property in Control of the Insured’ ie the house. There are some that cover this aspect – but not many – so the policy needs to be checked to see if it does not exclude as such.
Regards Ralph Watson R&R Ins Adv PL 0447795832
Absolutely right Alan. I wrote to Choice Magazine (who started this discussion) about this over a month ago saying precisely what you have said. I am a long standing subscriber to Choice and told them I was disappointed about how they had dealt with the issue. They acknowledged some of the concerns but have not published any amended article, nor I expect, will they.
Thanks Gregory. I will look into this as in commercial policies there is a write back for tenanted property. Extremely disappointing if this is correct in personal lines as it greatly devalues the coverage and takes away the greatest benefit. Insurers would be better to price the risk than remove cover and greatly devalue the protection.
PS I went on to LMI PolicyComparison.com and looked up the first policy I could think of and it had the write back that I thought would be there. It reads:
but we will cover your legal liability under a tenancy rental agreement when your contents in your landlord’s residential property are insured under your policy, for damage caused by:
• water leaking from pipes, washing machines, dishwashers or water overflowing
from blocked baths or tubs;
• fire damage to your landlord’s property.
Can you please provide me with an example of one that has a blanket exclusion. Thanks
Gedday Allan – a few examples for you.
Westpac, Youi; Both exclude outright;
Budget Direct restrict to premises on your policy; Allianz restrict to premises on your policy; RACQ restrict to your home and only for fire and leaks; Suncorp restrict to your home and only for fire and leaks;
Another aspect not considered is the damage caused to temporary accomodation on holidays etc. eg motel room etc..
Thanks for this Greg, I will review these with interest and do a blog post on this in the New Year.
Thanks again for sharing your findings. Very interesting and worrying.
Al