Insurer loses out on arson dispute

An insurer has been compelled to pay a claim from a man who set fire to and destroyed his own home, after the Financial Services Ombudsman (FOS) found his mental illness meant the damage was unintentional.

FOS was asked to rule on the dispute with the unnamed insurer, after the man’s ex-wife and joint policyholder was denied her insurance claim, based on exclusion clauses in the policy that stated the insurer would not pay claims that arose from damage intentionally caused by someone living at the home.

The applicant disputed this decision on the basis that her then-husband, known as WB, was suffering from a mental illness when the incident occurred.

On the day of the fire, the applicant was so concerned by WB’s behaviour she left the home and took out an Apprehended Violence Order. The police who attended the fire had concerns about WB’s mental state and he was taken to hospital and put on suicide watch.

Although he was charged with a number of offences, he was discharged by a magistrate’s court, where the magistrate found he was suffering from a mental illness that seriously impaired his mental functioning.

The FOS Panel used this to form its decision.

“Based on the weight of the evidence, the panel therefore concluded that WB did not have the mental capacity to be in control of his actions at the time he started the fire,” it states.

“Accordingly, the Panel was not satisfied he was able to form the necessary intent to cause damage. Therefore, the (insurer) was unable to rely on the exclusion clause to deny the claim.”