A company that lodged claims for earthquake damage to two farmhouses will not receive a payout after the complaints authority determined the issues were pre-existing.

The claimant said the buildings were damaged by a 5.4-magnitude quake in November 2018. The epicentre was about 45km from the affected properties, and Geoscience Australia limited the damage radius to 27km from the epicentre.

The complainant’s consulting engineer acknowledged the buildings were outside the radius but argued the tremors triggered a release of energy beneath the rocky outcrops on which they were located. 

The expert said the buildings had “underlying or latent conditions”, including previous damage that had been repaired, but ground movement associated with the quake caused the repaired cracks, and new fractures, to open. 

Insurer Allianz engaged a forensic civil and structural engineer, who found brickwork cracking across several parts of one of building, referred to as House H. The second property, House P, had cracks in its garage and a separation between a storeroom and the home. 

The insurer’s engineer said losses were caused by long-term foundation movement and pre-existing brick-mortar deterioration.

In its dispute ruling, the Australian Financial Complaints Authority says both engineers “identified damage, similar to the complainant’s claimed damage, that pre-dated the earthquake” in House H. 

The authority says the home’s renovated rooms were not damaged, and the condition of external brickwork indicated wear and tear was a significant factor in the loss. It made similar observations around damage to House P. 

“While both experts accept it is possible in the right conditions for House H to suffer earthquake damage despite being outside of the radius of damage, the insurer’s expert has disputed these conditions existed in the House H claim,” the authority’s adjudicator said. 

“Even if I was satisfied the earthquake was a proximate cause of House H’s damage, this would be a concurrent cause with other excluded events (wear and tear, long-term movement).

“In such a case, the insurer would be entitled to rely on the exclusion to deny the claim.” 

See the ruling here.