Tattoo shops and massage parlours have been on the list of ‘uninsurable’ risks for some time. Tobacconists have recently joined the watch list, with some insurers declining cover due to the increased claims risk resulting from targeted firebombing attacks and ram raids.
An Insurance News article in May this year noted that police have warned shop landlords that illegal cigarettes and vapes found in tenants’ premises may invalidate insurance claims if there is an arson attack. Firebomb attacks have hit 59 tobacco stores across Victoria during a gangland turf war, and Taskforce Lunar was set up to investigate them.
The spate of attacks in Victoria has led to discussions between police and insurance companies. They suggested that a property owner should contact their insurer if they have any questions or concerns regarding their insurance coverage.
The police are highlighting both the risk to current insurance arrangements, as well as the potential for nearby businesses and properties to be adversely impacted by the fires and other criminal activity.
A News.com article echoed the same sentiment, where landlords potentially caught up in Victoria’s illicit tobacco trade have been warned of the insurance risks that come from crime, with council letters sent out to shop owners across metropolitan and regional areas advising them of potential “adverse impacts” to their coverage.
The Guardian reported that before the firebombings comes the warning:
“Earn or burn.”
It is a simple directive from organised crime syndicates to tobacco shop owners to sell their illegal products. If they refuse, their business will be torched. There is no register or licensing regime of tobacco sellers and detectives discovered there were more than 800 such shops. They suspect “a large portion of the tobacco industry has been infiltrated by serious and organised crime,” Superintendent Jason Kelly told reporters.
Similar issues to those in Victoria were being experienced in Queensland, and other arson attacks have previously been reported in Western Australia.
Concerns are growing that NSW may experience the same ‘turf wars’ as Victoria1. The Minns Government is allocating funds as part of its crackdown on illegal tobacco sales and vape sales but need additional inspectors to manage this.
From 1 July 2024, all non-pharmacy retailers including tobacconists, vape shops, and convenience stores were banned from selling vaping accessories and devices2. However, Guardian Australia reporters were able to easily buy vapes from convenience and tobacco stores in Melbourne, Sydney and Adelaide after the laws kicked in.
So what does this mean for strata insurance and owners?
- Owners must accurately disclose commercial occupancies on renewal and when obtaining quotes3
- Tobacconists are under greater underwriting scrutiny and additional information will be required
- The current underwriting approach for tobacconists differs between insurers. It will be either:
- An outright offer to decline to offer a quote or renewal terms, or
- Underwriting the risk on a case-by-case basis resulting in a ‘decline’ or terms offered with a premium loading and/or specific exclusions to cover
Working together to increase awareness
It is important to know who is occupying or leasing lots within the strata property for insurance purposes. The occupancy is relevant for commercial strata and mixed-use strata properties deemed as residential strata.
The key is educating owners, property managers and strata managers of the emerging risk related to tobacconist shops. Owners also need to be aware they have a duty to disclose any change in commercial tenancy to the insurer via their broker on renewal – and potentially mid-term – if there are concerns.
As always, we are here to assist with any questions, so if you need help to determine the type and level of cover that’s right for you, contact Whitbread today.
T: 1300 424 627
E: info@whitbread.com.au
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- https://coastcommunitynews.com.au/central-coast/news/2024/08/turf-war-fears-on-peninsula/ ↩︎
- https://www.theguardian.com/australia-news/article/2024/jul/02/shock-out-of-stock-and-secret-supplies-what-we-found-when-we-tried-to-buy-vapes-in-australia ↩︎
- Owners corporations have a duty to take reasonable care not to make a misrepresentation to the insurer under the Insurance Contracts Act 1984. Failure to do so may result in the cover being avoided (treated as if it never existed), or its terms may be changed. This may also result in a claim being declined or a benefit being reduced. ↩︎
