Undisclosed Tenant Changes Result in Denied Insurance Claim for Landlord

The landlord had initially secured insurance coverage in 2019, listing the tenant's business as a licensed restaurant with wok cooking. However, by the 2023 policy renewal, the tenant had ceased restaurant operations, and the upper floor of the premises was being used weekly by a religious organization for meetings. This significant change in occupancy was not communicated to AIG.

In May 2023, the landlord filed a theft claim amounting to $99,295. AIG declined the claim, citing the landlord's non-disclosure of the change in tenant activities. The insurer emphasized that, as of May 2023, its underwriting guidelines had been updated to classify religious institutions as "outside appetite" due to increased fire risks associated with arson attacks.

AFCA supported AIG's decision, stating that the insurer would not have renewed the policy had it been aware of the tenant's change in operations. The authority concluded that AIG was entitled to reduce its liability to nil and decline the claim based on the landlord's failure to disclose the change in tenant activities.

This case serves as a crucial reminder for landlords to maintain open and transparent communication with their insurers regarding any changes in tenant operations. Accurate disclosure ensures that insurance coverage remains valid and effective, safeguarding against potential claim denials. Landlords should regularly review and update their insurance policies to reflect current tenant activities, thereby mitigating risks associated with non-disclosure.