The owner of a wellness business that was overwhelmed with water and mould damage will be partially covered for her losses after winning a dispute against her insurer’s application of a flood exclusion.

The complainant, who operated her salon on the second floor of a property, lodged two claims with Chubb in early 2022 following significant wet weather events, including heavy rain, flooding and storms.   

The first claim for water inundation was submitted on February 28, 2022, and denied by the insurer as the insured had not taken out optional flood cover on her business insurance package. The claimant did not dispute this decision.  

The second claim related to contents damage caused by black mould growth from a water-saturated carpet. Chubb says the flood also caused this and denied the claim.  

The insurer’s assessor, who initially reported no evidence of water ingress, suggested that the likely cause of the mould was the location’s proximity to the flooding and a lack of structural drying.  

Chubb also relied on findings from its mould remediation expert, referred to as CE, who reported that “higher than normal” humidity levels stemming from the ground floor inundation as well as poor ventilation caused the mould growth.  

CE notes that the site had a power outage for several weeks due to the floods and says that the moisture would not have been an issue if there had been functioning ventilation.   

The business owner says the water ingress and subsequent mould were caused by heavy rain that entered via the glass balcony doors and saturated the carpet at least two days before the ground floor flooded.  

The woman says the carpet had been located near the glass doors and had remained in place for over six weeks before it was found to have been damaged and replaced.   

She highlighted findings from an appointed hydrologist, who noted the property had been hit by “very rare, extreme rainfall” on February 25, which they say caused it to flood partially. The woman also relied on several witness statements of people who attended the premises once access was possible.  

An insurer-appointed builder, referred to as SW, reported that it was “not plausible” that water entry from the glass door caused the claimed moisture and mould damage. The builder says the sliding door components had been in “good condition” and that positioning the balcony slab would have directed water away from the salon.  

SW agreed that the claimed damage was “attributable to saturation of the building materials from the flood, with subsequent high humidity throughout internal areas as building materials dried out.”  

But the Australian Financial Complaints Authority panel questioned the builder’s findings after a claimant-provided video of the door showed that it was capable of “significant horizontal movement” and could have been “manually prised apart when locked”.   

The complainant says that given the strong wind during the heavy rain, it was “a virtual certainty” that water would have entered the area.   

In its decision, the panel acknowledged that the evidence provided by both parties indicated that several factors contributed to the claimed damage.   

“The panel accepts the moisture and humidity levels on the upper level would have been increased by the significant flooding on the ground floor, exacerbated by the lack of ventilation over several weeks,” the authority said.  

“However, having considered all the available evidence, the panel is also satisfied it is more likely than not there was water ingress into the upper level through the glass balcony doors during storm(s), and that in itself caused moisture in the carpet and resulting mould in that upper level.”  

The ruling agreed that it was not possible to “precisely apportion responsibility for the upper-level damage between stormwater ingress and flood,” but accepted that it would be fair for Chubb to cover 30% of the claimed loss in proportion to the distance of water damage caused by the saturated carpet.  

The claimant sought $777,132 for the damaged items, which was more than the sum insured. The panel suggested that the parties “work together” to finalise a cash settlement, with the insurer covering 30% of the identified loss up to the $604,000 sum insured.  

The decision also required the insurer to cover the value of refrigerated stock damaged by the power outage.   

The panel accepted that while CE suggested a flood had caused the outage, there was no evidence to support this. The complainant says the stock was worth $28,000, but the ruling required more “reasonable evidence” to show that the amount was an appropriate value.  

Chubb was also ordered to pay 30% of the insured’s claim preparations cost, limited to $25,000, as well as any additional interest.   

Click here for the ruling.