GROUP: Insurance - Fire & General
SERVICE: House
OUTCOME: Not upheld
Issues: Onus/Burden of Proof; Quantum or Scope of Works
Summary: Ms N’s complaint was not upheld, because her expert reports did not indicate that the insurer had failed to identify additional damage caused by the floods.
Ms N held insurance on her house.
In January 2023, there were weather events causing significant flooding to the Auckland region.
Two weeks later, Ms N made a claim to the insurer, saying that the floods had damaged the house, and significant repairs were required. Ms N provided a quote from a builder which included repairs to the roof, replacement of the cladding, wall and ceiling gib, wooden flooring and replacement of the pool liner. Later Ms N also obtained an inspection report using x-ray investigations of the damage.
The insurer accepted the claim. However, a dispute arose about the scope of the works required to reinstate the damage. The insurer assessed the damage and determined that only the master bedroom and nearby bathroom had suffered damage resulting from the flood and estimated the repair cost for this to be $9,669.04. The remainder of the damage was declined by the insurer, on the basis that it was not sudden, or a result of the flood. In addition, some of the work was preventative rather than required to repair the damage.
Ms N made a complaint about the inspection undertaken by the insurer, saying it was limited to a visual inspection and the assessor did not enter the roof space.
The case manager’s assessment
When an insured makes a claim under an insurance policy, the law says that it is up to them to prove that they have suffered a loss, which is covered by the policy.[1] Here, Ms N needed to show that the damage was “sudden”. The policy did not define “sudden”. However, this is a legally defined term which means “‘abrupt’, ‘all at once’, ‘instantaneous’”.[2] Therefore, in order for the damage to be covered by the policy, it had to have occurred “instantaneous[ly]”. If Ms N could show that the damage was a result of the flood, then it would be considered “sudden” and covered by the policy.
Ms N believed that the insurer needed to do a better assessment, and the walls need to be removed to fully assess the damage. However, in Myall,[3]the Court found that if an insured disagrees with an insurer’s settlement of the claim, the insured must prove that there was damage missed, or that the settlement is unreasonable. Therefore, Ms N was required to prove the insurer had missed damage caused by the flood, or that its estimate of the cost to repair was unreasonable.
- The roof
In the quote from the builder, it said that the roof required replacement of gutters and repairs because the internal gutters had not coped with the amount of water which fell during the floods. It did not state that there was any damage to the roof caused by the floods.
The quote from the builder included an entire reclad of the house, but there was no reasoning about why the cladding needed to be replaced. Another expert merely noted general maintenance was needed to prevent future damage.
Consequently, there was no evidence of any damage to the cladding or roof as a result of the flood and the insurer was not required to include any these repairs in the settlement.
- The interiors of the house
The insurer included the interiors of two rooms in the house, while the builder included more rooms, without specifying which rooms, or why it believed that there was damage from the floods. This was particularly relevant as inspector noted that there was quite a bit of patching done to the walls and he was unsure why these areas needed patching. In addition, the inspection noted there were high moisture readings indicating active leaks.
As a result, there was no basis to require the insurer to make further payments for the interiors in the settlement.
- The floor
The builder said that there was about 5sqm of wooden floor in the laundry which had been water damaged and required replacement. However, in the videos of the flooding Ms N provided, there was clearly already water damage to the floor.
Therefore, even if it was accepted that there was some sudden damage to the laundry floor as a result of the flood, in line with case law,[4] in order for the damage to the floor to be covered by the policy, Ms N would need to show that the new damage would have materially affected the repairs which were already required.
As such, Ms N had not been able to show the insurer should include the laundry floor repairs in the settlement.
- The pool
The insurer said that the pool liner needed replacement because of “soil erosion, crack that has appeared and caused water damage”. It also noted that there was a crack in the pool area.
Even if it was accepted that this occurred “instantaneous[ly]”, the policy expressly excluded damage as a result of soil erosion.
Therefore, the insurer was not required to include the pool repairs in the settlement. Consequently, Ms N had not shown that the insurer missed damage from the flood, or that the settlement was unreasonable.
Complaint No: 00232492
[1] This is known as a prima facie claim.
[2] Lumbercorp (BOP) Limited v GIO Insurance Limited (2000) 11 ANZ Insurance Cases 61-475 (HC), Justice Wild.
[3] Myall v Tower Insurance Ltd [2016] NZHC 251 at [60].
[4] Bligh v Earthquake Commission [2018] NZHC 2102 at [20]; Sadat v Tower Insurance [2017] NZHC 1550 at [254] and cases cited in both.