Need to know
- Insurance companies are pursuing renters when accidental damage to a property leads to a landlord insurance claim
- Westjustice says many of these claims are flimsy and lacking proper assessment of liability
- Renters say being pursued for thousands of dollars has led to incredible mental stress
When Rosa (not her real name) was locked out on her balcony in July last year, she had no idea that almost a year later an insurance company would be pursuing her for thousands of dollars in damages.
Unbeknown to her, the outside door latch on her rented apartment in Melbourne was faulty and when she went out onto the balcony she found herself locked out.
Luckily she had her phone on her and was able to call for help. "If I didn't have my phone on me I could have been stuck out there and got hypothermia," she tells CHOICE.
I wasn't expecting it, the degree of their arrogance is just crazy. It was an accident and it wasn't my faultRosa, renter in Melbourne
Eventually the fire brigade had to break down her door to get her out, damaging the door in the process. But the real shock came when a debt collection agency acting on behalf of Chubb Insurance (her landlord's insurance provider) told her she had to pay $3600 for the damage.
"I wasn't expecting it, the degree of their arrogance is just crazy," she says. "It was an accident and it wasn't my fault."
She says the stress of being pursued for thousands of dollars took its toll on her mental health.
"It has added lots of stress, it adds anxiety, I would get panic attacks because of it," she says. "The damage it can do to people and their mental health is immense. To do something so unjust to people is just disgusting."
Renters being pursued by home and contents insurers over accidental damage to a rental property is far from uncommon.
Far from uncommon
Rosa sought legal advice from Melbourne community legal centre Westjustice, which gave her information that she sent back to the debt collection agency explaining that she probably wasn't liable. The case was dropped and the recovery action ceased.
But renters being pursued over accidental damage to a rental property is far from uncommon.
Matthew Martin, the legal director of Westjustice's economic justice program, says the organisation has seen about 10 similar cases in the past year.
"That's just through our clinic alone, which only services the western suburbs of Melbourne," he says. "I can only imagine the number of renters it would be affecting nationally, it must be huge."
He says Rosa's case, and the fact that it was dropped so quickly when she pushed back, shows how dubious many of these types of insurance claims are.
"These claims are either not investigated at all or not investigated properly, and claims that are made without proper links to the renter being the cause of the damage, are an indication that most of these claims are flimsy," he says.
"When you start to burrow down into the laws of negligence – certainly in all the cases we have seen – the damage is not caused by the renter at all, or is accidental damage, or certainly damage that is not intentional, or malicious, or reckless," he adds.
Renters unaware of their rights
Chubb Insurance tells CHOICE it doesn't comment on individual cases but maintains that recovering claims helps keep premiums low for customers.
"Recovering costs from at-fault parties keeps claim costs down and is a mechanism used to keep premiums at reasonable levels for our customers," a Chubb spokesperson tells us. "Feedback on our recovery process is welcomed and reviewed in accordance with our policies."
The issue highlights that insurers are hoping renters won't research their rights in cases like these and will just pay up
But Martin says the issue highlights that insurers are hoping renters won't research their rights in cases like these and will just pay up, despite potentially not being liable.
"There is stress and a mental health impact when renters receive a demand like this," says Martin. "Sometimes it's for hundreds of thousands of dollars without the insurer providing any basis for the claim."
In Martin's view, most renters aren't aware of their rights and wouldn't push back against insurance claims when the damage was accidental.
"I can only imagine most renters would have no idea what is going on in a situation like this or be aware of their rights in the situation," Martin he says.
'Trying to rob me'
Javier (not his real name) got a letter earlier this year from a solicitor. It said he owed QBE Insurance more than $180,000 due to an accident that happened at a property he rented almost four years earlier. He couldn't believe it.
"I was shocked, I felt horrible," he tells CHOICE. "My wife was pregnant and I was on JobKeeper at the time. We're in lockdown, having a baby, and you get a letter saying you owe over $180,000? I went crazy."
The rental property Jose occupied was damaged in 2017 after an accidental fire involving a faulty barbecue.
My wife was pregnant and I was on JobKeeper at the time. We're in lockdown, having a baby, and you get a letter saying you owe over $180,000?Javier, renter in Melbourne
He says he and his wife, both migrants from Brazil, were planning on buying a property for their new family, but have now had to put those plans on hold as QBE pursued them for the damage.
"I felt like they were trying to rob me, I felt like it was really dodgy," he says. "Something that happened four years ago and suddenly you get a letter saying you owe over $180,000 to a company you have never heard of before."
Are you a renter who has been pursued by an insurance company over accidental damage? Share your story with CHOICE investigative journalist Jarni Blakkarly at firstname.lastname@example.org.
QBE (partially) responds
QBE Insurance did not respond to questions about how often or in how many cases they pursue renters over accidental damage.
"QBE works within the regulatory framework set out for recoveries across the industry, which are aligned with the General Insurance Code of Practice including considerations surrounding financial hardship," a spokesperson says.
Several days after CHOICE made media inquiries to QBE in mid-July, Javier's lawyers were told that the recovery action against him would be ceased and he was no longer being pursued for more than $180,000.
Insurers are using legal letters to get renters to hand over money that they're very unlikely to owe.
'Abuse of power'
Erin Turner, director of campaigns and communications at CHOICE, says renters shouldn't be pursued by the landlord's insurance company, especially years after an accident occurred.
"Landlord insurance provides additional financial security for landlords by covering loss or damage to a rental property," she says. "It should not result in additional financial risks to renters."
Insurers are taking advantage of people when they try to recoup costs without doing the most basic due diligence to see if the debt is legitimateErin Turner, director of campaigns and communications at CHOICE
"Insurers pursuing renters for damages looks like a case of abuse of power – these companies are using legal letters to get people to hand over money that they are very unlikely to owe."
She adds that companies needed to do better due diligence about a renter's actual liability before pursuing them.
"Insurance companies have significantly more resources and knowledge about the law than people who rent," she says.
"Insurers are taking advantage of people when they try to recoup costs without doing the most basic due diligence to see if the debt is legitimate. Insurers are causing significant stress and harm to people in the interests of their bottom line."
Insurance Council responds
But the Insurance Council of Australia (ICA), the industry lobby group, tells CHOICE that recoveries put downward pressure on insurance premiums.
"The Insurance Council of Australia notes that recoveries play a role in placing downwards pressure on premiums," a spokesperson says. "The ICA has recently launched a new Code which sets out clear obligations in relation to financial hardship.
"The ICA engages with consumer representatives through its Consumer Advisory Committee, including on areas relevant to landlord insurance. We would welcome further engagement to explore the issues raised through this forum."
New Zealand renters not held liable for unintentional damage
Westjustice's Matthew Martin points approvingly to the laws in New Zealand, which give clarity and certainty that renters can't be held liable for damage unless it was intentional.
The law is very clear [in New Zealand] that if the damage is accidental or unintentional, tenants are not liableMatthew Martin, WestJustice
"The law is very clear [in New Zealand] that if the damage is accidental or unintentional, tenants are not liable," he says. "They are treated as third-party beneficiaries under the landlord policy in this situation, and they wouldn't be pursued.
"I think the insurance industry and the laws in Australia have a bit of catch-up to do to adequately protect tenants."
Australia needs 'much clearer rules'
CHOICE's Erin Turner says, "We need much clearer rules about the limits of insurers to pursue debt from people who rent.
"The New Zealand laws are much stronger than what we currently have in Australia. Australian insurers could also immediately put in place policies and practices that stop harm to people who rent."
Martin recommends that any renter being asked to pay for accidental damage by an insurance company contact Legal Aid in their state or a community legal centre for assistance.