Lim insures his house against fire for RM 500,000 with AWA Insurance Co. in his application for the fire insurance, Lim stated that the garage in the compound is used as a warehouse for his business. His house burnt down last night. The fire was caused by an explosion of the huge gas cylinders used for packaging in the warehouse.

Which of the following legal position in respect to the above scenario is INCORRECT?

AWA Insurance Co has no right to avoid the contract of insurance on the grounds of lack of disclosure by Lim.

Lim has the insurable interest over the subject matter insured.

AWA Insurance Co can claim the absence of disclosure of the material facts could cause the contract to be rescinded.

Lim may defend himself for any action by AWA Insurance Co to refuse liability by applying the case of Abu Bakar v Oriental Fire & General Insurance Co Ltd [1974] 1 MLJ 149