The Australian Financial Complaints Authority (AFCA) has upheld a decision by Commonwealth Insurance to decline a claim for fire damage at an investment property that was likely caused by electrical equipment installed by the tenant for cultivating cannabis.

AFCA says the insurer is entitled to reject the claim since the investment home insurance policy issued to the complainant excludes illegal activities carried out by a tenant.

The loss would have been covered had she taken up the optional cover available for malicious damage and theft by a tenant, but she did not.

The complainant, who says English is not her first language, argued in her submission that she had been advised by the insurer that the policy “covers everything”.

She says the insurer should have been aware that her lack of English fluency meant she relied on what had been communicated by the representative who sold her the policy and that she was never asked to confirm if the cover was suitable for her needs.

The complainant also claimed she was not given the option to take out the protection for malicious damage by the tenant.

But AFCA says based on the evidence that has been provided, the complainant has been informed every year when her policy was up for renewal that she had the option to take up the extra protection.

In the welcome pack that was sent to her in 2017 and subsequent renewal documents plus product disclosure documents mailed to her up until 2019, it was clearly stated that damage caused by tenants’ illegal activities is excluded unless the optional cover is taken out.

The self-managed property was damaged in January last year.

“The certificates and renewal notices show a clear and unambiguous table describing the insured events covered and the optional covers not selected,” AFCA says in its ruling.

“It is clear from the table in the certificates and renewal notices that malicious damage or theft by tenant is an optional cover and was not taken out by the complainant.

“It is clear the complainant’s policy does not provide cover for ‘everything’.”

AFCA says the complainant had several years to review the policy terms to ensure the terms were suitable and to ensure she had selected the level of cover that was suitable for her needs.

According to details in the ruling, the police found remnants of a cannabis hydroponic setup in the house after the fire was put out.

The police said the fire began in the front room where there were several transformers. They believed the fire had started there because of the extensive damage in the room and the fire pattern observed. They suspected the transformers had overheated and caused the fire.

The fire forensic report also reached similar conclusions.