A man who stepped out of his shower and fell through the bathroom floor is among a growing number of people affected by insurers’ handling of gradual damage claims.
The man found extensive water damage beneath the tiles and flooring of his bathroom and lodged a claim with his insurance company. While the insurer acknowledged that a leak had occurred, it argued the resulting damage was not sudden.
Because the leak had likely been present for some time, the claim was limited to the policy’s gradual damage benefit cap. Most policies limit gradual damage cover to between $2,000 and $5,000 and typically only accept claims where the leak originates from an internal water pipe or system.
The man contended that the MDF flooring would have broken down quickly after water intrusion, suggesting the damage happened suddenly.
He complained to the Insurance and Financial Services Ombudsman, which said that, to be covered under the main policy, the damage needed to happen suddenly and all at once. However, the evidence showed a hidden leak and mould that would have taken time to develop.
The ombudsman scheme found the insurer had correctly applied its policy.
This financial year, 6% of disputes accepted by the Insurance and Financial Services Ombudsman for investigation have involved gradual damage, edging up from 5% the previous year.
Ombudsman Karen Stevens said the issue was becoming increasingly common and had ranked among the top five complaint categories over the past two years.
“The key issue is the gap between what people expect and what policies cover. Many people expect that, if they suddenly discover damage in their house, their insurer will pay to fix it,” she said.
“However, insurance only covers sudden damage, not damage that occurs over time and may have been discovered suddenly. It is the cause of the damage, rather than its discovery, that has to be sudden.”
Stevens said signs such as mould or a small, ongoing leak can indicate gradual damage. She stressed the importance of fixing leaks quickly, warning that leaving them unresolved can cause further damage that may not be covered by insurance.
“Damage is usually gradual with hidden water damage. Things like internal guttering can make any problems harder to spot and can cause serious damage before you know there’s a problem.”
“If you’re claiming for damage after a weather event, you need to show a clear link between the event and the damage. Insurance won’t cover issues that were already there before the event happened. Long-term issues like foundation movement are usually not covered.
Stevens said if a client is disputing a gradual damage claim decision, it is recommended to seek an expert assessment to provide evidence on the cause of the damage.
Expert reports can be crucial in resolving disputes, particularly where there is uncertainty about how and when the damage occurred.