Help! Just exchanged then house burnt down!
- Thread starter tigerGT
- Start date
Wow Ozperp. thank you for posting that. I think i may have made a very big mistake based on reading your post. I actually did make a claim but my insurance refused it on the basis that the house has not settled and it should go through the vendors insurance.
I did notify my insurance that the house was vacant when I took out the landlords insurance as well.
After they rejected my case i pursued it with the vendors insurance but they rejected it. I really should have gone to the Insurance Ombudsman Service after the vendors insurance rejected it but instead I asked for my 12k back and rescinded from the purchase. What a shame.
I did notify my insurance that the house was vacant when I took out the landlords insurance as well.
After they rejected my case i pursued it with the vendors insurance but they rejected it. I really should have gone to the Insurance Ombudsman Service after the vendors insurance rejected it but instead I asked for my 12k back and rescinded from the purchase. What a shame.
Yes, it is a shame that you took your $12K back; you definitely would have had a case with the IOS if you'd insisted the insurer pay out, based on the facts as I understand them and conveyed them to the IOS. I am so very sorry; of course I didn't want to make you feel worse.
I'd still give it a try, but unfortunately, you're probably going to be out of luck. The IOS advised that in accepting your $12K back you've effectively ended the contract to purchase, so I don't think there's any option to reinstate the contract and insist on the repairs. I think your only avenue would be if you could demonstrate that you've had a material loss due to the insurer wrongly denying your claim and causing you to withdraw, there may be a cause of action against the insurer on that basis. eg if you could show that the repaired property would be worth more than your purchase price, then you've effectively made a capital loss by their failing to honour the claim. I think the legal obstacle - possibly insurmountable - would be in quantifying that loss. But if you feel strongly about it (and I understand why you would), consult with the IOS, and decide whether you think it's worth paying - I dunno, maybe $5K - seeking a legal opinion as to your chances.
Sorry to "re-open the wound", but I felt it was important for us, as property investors, to know definitively where we stand on the issue of pre-settlement insurance, which is why I pursued and posted it.
Good luck, tigerGT.
In the absence of an financial/pecuniary interest, the insurer won't pay.
This is because you don't have a financial interest in the property and/or haven't made a loss.
As you had no obligation to settle, you have made no loss so there is nothing for them to indemnify you for.
I
This is because you don't have a financial interest in the property and/or haven't made a loss.
As you had no obligation to settle, you have made no loss so there is nothing for them to indemnify you for.
I
I suspect you're correct now that the contract has been rescinded, TF, but you're not arguing that the insurer wasn't obliged to pay when tigerGT made the claim, surely? At that time, tigerGT had a binding contract to purchase.
Hey got a funny story to share.
i bought a swag of properties for people this week in some regional suburbs, and got call from agent as its about to exchange unconditional...
agent said sorry but you cant buy home anymore... i was p!55ed as i thought i was being gazumped. she said a buyer came in and offered well over full price... and there no easy way to say this. i was like.... and she goes i told him he couldnt buy it and he went angry, and threated me and to torch the house if he doesnt get it. anyways the agent was watching TV this morning and saw the house on fire... the guy couldnt get it coz i had the relationship there with agent and he burnt the house down!
i am pretty annoyed coz it was a ripper one of the cheapest ever.... not needing much work, and now its been burnt coz the guy was angry....
i see the humourous side now as i have a story to share.
i bought a swag of properties for people this week in some regional suburbs, and got call from agent as its about to exchange unconditional...
agent said sorry but you cant buy home anymore... i was p!55ed as i thought i was being gazumped. she said a buyer came in and offered well over full price... and there no easy way to say this. i was like.... and she goes i told him he couldnt buy it and he went angry, and threated me and to torch the house if he doesnt get it. anyways the agent was watching TV this morning and saw the house on fire... the guy couldnt get it coz i had the relationship there with agent and he burnt the house down!
i am pretty annoyed coz it was a ripper one of the cheapest ever.... not needing much work, and now its been burnt coz the guy was angry....
i see the humourous side now as i have a story to share.
If it was a great deal, why don't you insist on the contract being fulfilled and claim on the insurance, like tigerGT wishes he had? I don't believe the vendor can just withdraw from their obligation to sell to you because of the fire. If they're offering to release you from your obligation to buy, you don't have to accept the offer.
I am actually.
The fact that the contract could be rescinded means it wasn't binding.
Equally, to go ahead with the contract when one had the option not to would amount, IMHO, to not mitigating your loss and would also result in the claim being declined.
As I've said before, no financial interest in the property means no loss means no claim.
Potential gains or opportunities lost generally aren't covered, only the real deal.
If you're suggesting that the fact that a gratuitous offer by the vendor to release you from the contract negates your insurance, are you able to provide cases or some other reference supporting this position?
I'm aware of the requirement to mitigate losses, but I don't think this is a reasonable interpretation of this requirement.
The position you outline seems a bit like saying that if your car is incinerated, but your neighbour offers to let you use their car whenever you like, then you haven't really suffered a loss (because you still have access to a car) so there's no need for the insurance to pay out.
No. The insurance was not negated, there was simply not an event that could give rise to a claim. The insured had no property rights over the insured asset and, as a consequence, made no loss. Insurance indemnifies loss.
No loss, no claim.
Have to disagree. Having the option to rescind the contract, if the insured wanted to go ahead with the purchase, notwithstanding the fire, they had two options:
* renegotiate thje price taking account of the post-fire value of the property. The loss in this instance sits with the vendor or their insurer
* voluntarily go ahead with the contract at the pre-agreed price, thereby paying more for the asset than it was worth and expect the insurer to pick up the loss
In the latter instance a conscious choice is made to an incur a loss. This isn't just failing to mitigate a loss, this is choosing to have one.
No. If *my* car was incinerated, *I* have incurred a loss. Property of a particular value, owned by me, has been destroyed. The loss of utility is irrelevant (unless I was insured for costs brought about by loss of use whereby, yes, I would be unable to make a claim for loss of use if I was using another car for free).
To maintain the car analogy, if I insured your car and it was incinerated, should I be able to make a claim? Is it actually any different if we had a non-binding agreement for me to buy it one day?
It seems as if the vendor was at fault through ignorance. He did not realise that he has to notify the insurer that the property was vacant. He was the loser, big time. Your loss by comparison was very much smaller.
But this has been an education to me as well as to many in the forum perhaps. My practice and forum advice has been for the buyer to insure after exchange and before settlement. That may, as it turns out, not be the best advice.
But this has been an education to me as well as to many in the forum perhaps. My practice and forum advice has been for the buyer to insure after exchange and before settlement. That may, as it turns out, not be the best advice.
Hi geoffw,
DO NOT stop taking insurance immediately after exchange until you have had your contract checked and received advice from your legal eagle. (In writing) You said it above, it may be, but it also may not be.
So you will pay premiums for a month longer than you would otherwise. Big deal.
Many years ago the Commercial Hotel in Kalgoorlie burnt under the same circumstances and the purchaser's insurer paid. I know this because I was the claims manager for National Mutual Fire Ins. Co. at the time. I have been out of insurance for a long time and do not purport to know the answers. Only that it is a grey area and to be careful.
Better to be safe than sorry.
Policy wordings differ from company to company and RE cotracts differ from state to state.
TF, unless you have irrefutable proof of your advice here, (Yeah I know you are not giving advice, but some may act on your argument) and that it applies accross Australia, maybe you should investigate further and then either retract or quote your sources.
I could be wrong here and you could well be a highly qualified solicitor specialising in insurance law, in which case I think you should indicate that.
Anyway I will continue to insure.
Cheers.
Chrisv
OK, I'm seeing our point of difference. In the absence of the gratuitous offer from the vendor to rescind the contract, my understanding is that tigerGT had a binding obligation to purchase, which in most states is not negated by the fire.
What makes you think that the purchase contract wasn't binding?
Once it was determined that her insurance would not cover the fire then I was able to offer another price. The solicitor told me that if the price was acceptable then I would agree to purchase at the new negotiated price and I will fix the damages. The other scenario was that the vendor rejects my offer and I have option to rescind. This is what happened. The vendor rejected my initial offer and then I received my 5% deposit back in full.
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I had insurance at the exchange and i did my insurer of the vacant possession. As soon as I found out of the fire i immediately lodged a claim. I assumed the vendors insurance would take care of it but thought just to be safe I will lodge a claim. It got referred to some back end department and then I receieved a call a few days later. It was a claim manager who told me that i didnt have a case and that it wasn't their problem. They said it needs to be done through the vendors insurance. (this is the bit that upsets me most looking back. I didn't know any better and took her word for it. I thought that of course the claims manager knew the rulings etc... i have since canceled my policy with them. I would love to make a formal complaint but don't know what I will achieve).
I spoke to a property lawyers recently and I was advised that my insurance is obliged to act and accept the claim. this did not happen. I went through a solicotor/conveyance whom obviously didnt have a clue! I will not use him again. I saw 2 builders and none of them knew that my insurance should cover it. The realestate agent didnt know. the two builders i spoke to didnt know. even the vendors insurance didnt make a mention of my insurance and that i could claim through my insurance. No one knew anything about this and thats what sux!
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I have learnt lots however and will still get insurance before exchange next time. this is even more reason why i would get insurance at exchange. Only next time thanks to Ozper, the IOS and the property lawyer i spoke to recently I will know what my rights are when it comes to this vague area.
.
I had insurance at the exchange and i did my insurer of the vacant possession. As soon as I found out of the fire i immediately lodged a claim. I assumed the vendors insurance would take care of it but thought just to be safe I will lodge a claim. It got referred to some back end department and then I receieved a call a few days later. It was a claim manager who told me that i didnt have a case and that it wasn't their problem. They said it needs to be done through the vendors insurance. (this is the bit that upsets me most looking back. I didn't know any better and took her word for it. I thought that of course the claims manager knew the rulings etc... i have since canceled my policy with them. I would love to make a formal complaint but don't know what I will achieve).
I spoke to a property lawyers recently and I was advised that my insurance is obliged to act and accept the claim. this did not happen. I went through a solicotor/conveyance whom obviously didnt have a clue! I will not use him again. I saw 2 builders and none of them knew that my insurance should cover it. The realestate agent didnt know. the two builders i spoke to didnt know. even the vendors insurance didnt make a mention of my insurance and that i could claim through my insurance. No one knew anything about this and thats what sux!
.
I have learnt lots however and will still get insurance before exchange next time. this is even more reason why i would get insurance at exchange. Only next time thanks to Ozper, the IOS and the property lawyer i spoke to recently I will know what my rights are when it comes to this vague area.
In Brisbane, we have always been told we MUST have insurance in place (or a cover note at the very least) by 5pm the day after signing the contract. We used to get the freebie cover note, but last purchases we had to pay up front the twelve month premium. Probably insurers are sick of covering houses for a month for no cost and then losing the actual business.
If something happens to the house, at least we have done what we have been told we must do. I am also of the opinion that in the scheme of things, a month's premium is a small price to pay to have the cover, even if it turns out that the vendor's policy covers the damage, and not the one I have taken out.
I also have known for a long time about the (usually) 60 day limit on coverage if the house is empty. I think it is disgusting that this is not made known by the insurers, and buried in the pages of small print. It is a pretty major point and should be made very clear. There are grey nomads travelling around Australia who probably have no idea their insurance is void. It is not something that is well known.
If something happens to the house, at least we have done what we have been told we must do. I am also of the opinion that in the scheme of things, a month's premium is a small price to pay to have the cover, even if it turns out that the vendor's policy covers the damage, and not the one I have taken out.
I also have known for a long time about the (usually) 60 day limit on coverage if the house is empty. I think it is disgusting that this is not made known by the insurers, and buried in the pages of small print. It is a pretty major point and should be made very clear. There are grey nomads travelling around Australia who probably have no idea their insurance is void. It is not something that is well known.
My question is why you would want a property which has been so severely damaged by fire.
My nephews property was burnt similarly, and ultimately things would have been so much better had it been burnt down completely. His wife is asthmatic, and they have been advised never to move back in to the property. No matter what is done, there are some apsects of the fire which can never be completely ratified, especially for someone who suffers from asthma.
I just don't think I'd buy a property which was damaged by fire.
Kev
My nephews property was burnt similarly, and ultimately things would have been so much better had it been burnt down completely. His wife is asthmatic, and they have been advised never to move back in to the property. No matter what is done, there are some apsects of the fire which can never be completely ratified, especially for someone who suffers from asthma.
I just don't think I'd buy a property which was damaged by fire.
Kev
Absolutely agree. Most people aren't across their RE contracts and insurance means your loss, should there be one, is protected (subject to your cover etc.etc.) I am simply explaining why the why the insurer was within their rights to decline the claim in this instance.
Not giving advice. Simply pointing out why the insurer's position makes sense.
No loss. No claim.
