A homeowner has lost a claim dispute over leakage from an underground petroleum tank after the complaints authority found the storage facility was not covered. 

The claimant said he discovered the leak after a flood at his property in March 2022. He said floodwater had caused the tank to overflow, leading to environmental contamination, and asked insurer IAG to cover the costs of investigation, remediation and removal of the tank.

The man said he had been unaware the 10,000-litre fuel tank was beneath the property. The insurer’s investigations found it was used by a boat motor service business that previously operated at the site.

IAG declined the claim because the tank did not fall under its policy’s definition of a “fixture or item permanently attached” to the home and served no domestic purpose.

It suggested the leak was caused by wear and tear and the tank’s vent pipe being cut off at ground level, allowing contaminants to escape.

The insurer also noted its policy excluded damage from the escape or discharge of pollutants or contaminants.

The claimant said the insurer’s decision was unfair because he was unaware of the tank when he bought the property in 2020 and remained so until the flood.

He said the vent pipe was cut off only after the flood, by environmental protection workers who were investigating the source of the spillage.

In a dispute ruling, the Australian Financial Complaints agrees the “matter may not be entirely free from doubt” but accepts that “on balance” the policy did not consider the tank part of the insured property.

It adds that “in any event, there is no information to establish the [tank] was damaged by the flood” and “resultant contamination damage is precluded from cover by the pollution exclusion”.

AFCA considered whether the event could be covered as a “water and oil leaks” insured event, but says the policy also excluded such losses when caused by floods.

Click here for the ruling.

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