Key determination - Costly home repairs resulted in additional damage
In 2007, Mr T made a claim with his insurance provider when a leaking pipe caused his home’s structural slab to shift. The insurer investigated, accepted and settled the claim as a total loss, paying Mr T the agreed value of the property, as the likely repairs exceeded the sum insured under the policy.
During their investigation, the insurer engaged an engineer, XYZ Consulting, who prepared a report with the proposed scope of rectification work for the home in March 2008. The insurer provided Mr T with XYZ Consulting’s report and advised Mr T to follow it closely when undertaking repairs for his home, namely underpinning works. Mr T subsequently undertook repairs to restore his property.
Mr T then noticed cracks in his home and lodged a new insurance claim in 2015. The insurer denied the claim, stating that there was no single defined event that caused damage to the property. It was their view that damage had occurred over time due to unstable founding soils, and the problems caused by the underpinning works occurred because the experts Mr T engaged had failed to carry out the work as detailed by XYZ Consulting.
Our investigation found that the insurer had engaged an engineer from ABC Group for a second opinion for Mr T’s first claim, in August 2008. The insurer said they did not notify Mr T that a second engineer was providing a report because the report was taking too long to complete. The insurer also did not provide Mr T with the second report because they had already made a cash settlement for the claim.
This was significant because ABC Group’s report described XYZ Consulting’s recommended scope of work as fundamentally flawed. ABC Group stated that the work Mr T had undertaken on his home in 2008 was not the right approach from an engineering perspective and instead recommended doing as little as possible to the house structurally.
We found that Mr T should have been provided with both reports so he could consider the available options. The insurer breached its obligations to Mr T, which were not finalised by the cash settlement. We also found that additional soil testing should have been carried out before XYZ Consulting prepared the scope of rectification work. XYZ Consulting also failed to identify that there were actually four slabs at the property, not just one.
We found in favour of Mr T. The insurer was given two options:
- Meet the costs of all repairs at Mr T’s home, which were required as a result of the work carried out after the initial claim was accepted in 2008.
- Pay Mr T $309,000, which is our jurisdictional limit, plus interest from the date the insurer denied the second claim.
We also found that the insurer’s failure to provide Mr T with the report from ABC Group caused him unnecessary delay and inconvenience. We required the insurer to pay Mr T compensation of $3,000 to cover the non-financial loss experienced.