Forget any debate about insurance companies avoiding liability due to airy-fairy concepts of negligence. The situation is black and white and it is set out in sections 21 and 28 of the Insurance Contracts Act 1984.
Under s.21 of said Act the insured must inform the insurer of any matter that is relevant to its decision to insure the insured and the premium that it charges for such insurance. Quote:
21(1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that:
(a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or
(b) a reasonable person in the circumstances could be expected to know to be a matter so relevant, having regard to factors including, but not limited to:
(i) the nature and extent of the insurance cover to be provided under the relevant contract of insurance; and
(ii) the class of persons who would ordinarily be expected to apply for insurance cover of that kind.
A new contract of insurance is entered into every time you renew your insurance. If the problem existed before you last renewed, and you failed to advise the insurer that you were ignoring an obvious public liability risk, then you are in breach if s.21 of the above Act.
Under s.28 of the Insurance Contracts Act if you fail to comply with s.21 the insurance company can avoid liability. Quote:
28(1) This section applies where the person who became the insured under a contract of general insurance upon the contract being entered into:
(a) failed to comply with the duty of disclosure; or
(b) made a misrepresentation to the insurer before the contract was entered into;
but does not apply where the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into.
(2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.
(3) If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.
No insurance company would insure you if they knew you were ignoring a major safety risk. At the very least they would add a clause excluding any claims relating to the staircase. They would have no trouble convincing a judge of that. It is just like when you insure a car with hail damage. They will insure the rest of the car but not that part.
That means your insurance company can avoid liability in relation to the staircase under s.28(3). They do not have to prove negligence.