NAT: Tobacconists and vapes – not just bad for your health

This article is about the risks of illegal cigarettes and vapes in a strata building and the implications on strata insurance claims and premiums.

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 2024 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 ‘Victoria Police, councils warn landlords of insurance risks from illicit tobacco trade‘, 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 fire bombings 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.

Whitbread Insurance Brokers
E: info@whitbread.com.au
P: 1300 424 627

Important notice

This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.

Information is current as at the date the article is written as specified within it but is subject to change. Whitbread Insurance Brokers make no representation as to the accuracy or completeness of the information. Various third parties have contributed to the production of this content. All information is subject to copyright and may not be reproduced without the prior written consent of Whitbread Insurance Broker.

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228, License Number 229092 trading as Whitbread Insurance Brokers for further information or refer to our website.

Footnotes:

1. ‘Turf war’ fears on Peninsula
2. Shock, out of stock and secret supplies: what we found when we tried to buy vapes in Australia
3. 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.

This post appears in Strata News #733.

Read next:

• NSW: Another “Nail in the Coffin” for Smoking in Strata
• QLD: Smoking in a community title scheme
• WA: Q&A Can we stop neighbour from smoking on the apartment balcony?

This article has been republished with permission from the author and first appeared on the Whitbread Insurance Brokers website.

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