Insurance Claims Battle: Body Corporate Fails to Secure Higher Payout
A body corporate that filed a substantial insurance claim for water damage amounting to nearly $100,000 has been denied its request for a higher payout. The Financial Services Complaints (FSCL), an ombudsman service for financial service providers, was informed about the body corporate’s predicament. In 2021, the body corporate manager noticed a leak in the property’s basement and promptly hired a plumber to investigate the source. Despite the plumber’s efforts, no internal leak was detected. Consequently, in February 2022, a water care specialist was consulted, but they too could not identify the origin of the problem.
To address the issue, the body corporate decided to erect retaining walls. During this process, a broken valve in the waterline was discovered as the cause of the leak. The valve was promptly repaired, and the basement was dried out. Subsequently, the body corporate submitted an insurance claim for $95,528.54 under its material damage policy, covering various costs including groundwork repairs, electrical damage, plumbers’ fees, drainage costs, interior wall and door damage, and project management fees.
Upon assessing the property, the insurer found signs of significant damage, including rooms covered in silt and groundwater, swollen doors and skirting boards, peeling wallpaper due to mold, and erosion of an earth cable. Initially, the insurer denied the claim citing that the waterline was outside the property, and the gradual damage clause of the policy only applied to internal leaks. However, after further discussion, the insurer accepted the claim under the body corporate’s policy’s gradual damage extension and paid out the maximum amount of $10,000, supplemented by an additional $5,000 based on a trace and access clause.
Unsatisfied with the payout, the body corporate requested the insurer to reconsider its decision, arguing that the valve breaking constituted a single event and should not be limited to the $10,000 payout. However, the insurer maintained its stance that the damage fell under the gradual damage extension. Subsequently, the body corporate lodged a complaint with FSCL.
Upon reviewing the case, FSCL concluded that the insurer had rightfully assessed the claim. The policy included coverage for gradual damage, mildew, mold, and rot, which the peeling wallpaper and basement redecoration resulting from mold fell under. Furthermore, FSCL stated that swelling in the doors and skirting boards appeared to be a consequence of water exposure, which also fell within the definition of gradual damage.
A spokesperson for the Insurance Council emphasized that insurance primarily covers sudden and unexpected events. Gradual damage, which occurs over time, is typically excluded or limited in policies. Understanding the specific wording of policies is crucial to comprehending the scope of coverage and variations between providers.
Susan Taylor, the CEO of FSCL, noted that there is often confusion regarding the distinction between sudden and gradual damage. Many policyholders fail to grasp that deterioration occurring gradually is generally not covered by insurance due to policy exclusions. However, in some cases, like this one, there may be limited coverage available.
It is essential for policyholders to carefully read and comprehend insurance policy wordings, available on insurers’ websites, to fully understand the extent of coverage provided. By doing so, individuals can avoid any potential misunderstandings concerning their claims.
