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Issue 16 - January 2014

Key Determinations


In July 2013, we issued a Determination regarding an insurance claim under a home insurance policy held by the applicant and her former husband (WB). The claim arose when WB set fire to the home and totally destroyed the building and contents.

The financial services provider (FSP) denied the claim based on a number of exclusion clauses in the policy, which stated that the FSP would not pay claims that arose from damage intentionally caused by someone living at the home. The applicant disputed this decision on the basis that WB was suffering from a mental illness when the incident occurred.

A FOS Panel considered the dispute and accepted the applicant’s arguments due to the following:

  • WB was sent to a hospital for a psychiatric evaluation where the discharge material diagnosed his condition as “major depressive disorder with suicidal ideation/deliberate self harm”.
  • A report from a consultant forensic psychiatrist that described WB’s condition and his mental state at the time of the fire. In particular, this report noted:
    • The police who attended the fire were concerned about WB’s mental state and took him to hospital on an observation order.
    • He was initially put on suicide watch.
    • On the date of the fire, the applicant was so concerned with WB’s behaviour that she had left the home and taken out an Apprehended Violence Order (AVO).
    • WB’s account of the events of the day were faulty, which was indicative of an abnormal mental state.
    • WB suffers a recognised psychiatric disorder known as Major Depression.
    • WB satisfies the provisions of section 32 of the Mental Health (Forensic Provisions) Act.
  • Although WB was charged with a number of offences, he was discharged by the Magistrate pursuant to section 32 of the Mental Health (Forensic Provisions) Act. That is, the Magistrate accepted that WB was suffering from a mental illness and that this condition seriously impaired his mental functioning.

Based on the weight of the evidence, the Panel therefore concluded that WB did not have the mental capacity to be in control of his actions at the time he started the fire. Accordingly, the Panel was not satisfied he was able to form the necessary intent to cause damage.

Therefore, the FSP was unable to rely on the exclusion clause to deny the claim.

The Panel also considered the FSP’s argument that FOS should exercise its discretion under paragraph 5.2 of the Terms of Reference to refuse to consider the dispute. For reasons set out between paragraphs 23 and 34, the Panel did not accept the FSP’s position.

You can read the whole Determination here.