Not upheld: claim decline - breach of policy condition complaint against HCC International Insurance Company Plc

Decision detail

Summary

Mr V, a commercial property owner, made a claim under his HCC insurance policy for damage caused by cannabis cultivation discovered by police in January 2024. HCC declined the claim, citing Mr V's failure to comply with a policy condition requiring regular three-monthly property inspections. Mr V argued that a September 2023 video showing the property undamaged made earlier inspection failures irrelevant, and that the damage should be covered under other insured perils without the same conditions. The ombudsman upheld HCC's decision, finding that the 21-month inspection failure was relevant to risk assessment and that the damage fell clearly under the specific insured peril of illegal drug cultivation for which conditions were explicitly contractually specified.

The Ombudsman's reasoning

The ombudsman found that HCC was entitled to set conditions on the cover they provided for drug cultivation damage, and that such conditions are not inherently unfair or unreasonable when clearly stated in policy terms. The failure to inspect the property for 21 months was relevant because it could have encouraged the tenant to believe inspections were unlikely, reducing deterrence against illegal activity. The ombudsman rejected the argument that a later inspection in September 2023 made earlier failures irrelevant, and rejected the argument that damage should be covered under other insured perils (malicious damage or escape of water) without the same conditions, as the damage was clearly caused by the specific peril of illegal drug cultivation for which conditions were explicitly set out in the contract.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website