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Gradual damage - A Case Study

In 2002, the insurer insured his house with an insurance company. In November 2009, he discovered that a water supply pipe in the wall cavity behind the shower had burst. He turned off the mains water valve and contacted the insurer, which advised him to call a plumber. The plumber made a hole in the wall lining and replaced the piece of the pipe which had burst. The piece of damaged wall lining had to be replaced and, because the lining was no longer available, it was also necessary to replace undamaged wall linings around three sides of the bath. The insurance company’s assessor inspected the damage and advised him that the cost of locating and repairing the pipe might not be covered by the policy. However, the insured made a claim to the insurer for the cost of replacing all of the wall linings. The insurer indicated the cost of repairing the pipe was not covered by the policy and, because there was no resultant water damage to the house, it declined the claim.


The policy provided cover for “Sudden and unforeseen accidental physical loss or damage, unless excluded by [the] policy”. The cover provided by the policy also included a special benefit (“the benefit”) for “loss or damage through gradual deterioration ... caused by water which accidentally leaks or overflows or is discharged from any … internal water supply pipe … ”. While it was not clear why the pipe burst, the case manager believed that, in the absence of a specific sudden event, it was likely that the pipe failed through normal wear and tear. The benefit provided cover up to $6000 for damage resulting from a leaking internal water pipe. However, in this case there was no resulting water damage. The benefit also provided that, in the event of there being water damage from a source identified in the benefit, cover was available “up to $500 for the reasonable costs of locating the cause of the damage”. However, given that the damage was caused by the plumber gaining access to the pipe, as opposed to water damage, the benefit did not apply. The insured had concerns that the policy did not cover the reinstatement of the wall linings nor the repair of the pipe by the plumber. The part which failed (the pipe) was not covered and the cost of locating the problem only applied if the leaking pipe caused resultant water damage. If the wall linings had been damaged by the leaking water, cover would have applied in terms of the benefit. The insured commented that his insurance broker had advised him that “this sort of damage would normally be covered under a house insurance policy”. The case manager believed an insurer would only pay for damage covered by the terms of the policy. While the extent of the cover might differ from insurer to insurer, each insurer will apply the terms of its policy to a claim situation. The case manager believed the insurer had correctly applied the terms of the policy to the claim. Therefore, he could not uphold the insured’s complaint that the insurer should pay to have all the wall linings replaced. However, the insurer agreed to meet the cost of replacing the wall lining damaged by the plumber on an ex-gratia basis and the case manager recommended to the insured that he accept this offer.

Result: Complaint not upheld


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