Should the insurance company have to pay up after a fire in a brothel? Which case won?
Owner of brothel makes claim on insurance policy following fire
On 1 January 2012, there was a fire in a brothel which was run from premises in the Australian Capital Territory. The extent of damage from the fire was such that the brothel had to cease trading.
The brothel was insured under a specialised Adult Industry Insurance Policy which provided cover against property damage, including by fire, and public and product liability.
The insurance was initially issued for the period 3 September 2010 to 3 September 2011 and subsequently renewed for 12 months to 3 September 2012.
After the fire, the company that ran the brothel made a claim under the renewed insurance policy, which was current at the time of the fire.
Insurance company denies liability due to non-disclosure
Under Australian law, prior to entering into the insurance contract an insured has a duty to disclose to the insurer any relevant matter that a reasonable person in the circumstances could be expected to know to be relevant.
The insurer denied liability on the basis that at the time the policy was renewed, the brothel owner had failed to comply with its duty of disclosure.