Landlords who sought compensation for a loss of rent for three properties after they were deemed unliveable have won their claims dispute against their insurer.

The complainants lodged claims for rainwater damage to four of their properties on November 9 last year, which IAG accepted.

But the insurer denied cover for the homeowners’ loss of rental opportunities at three of the four, arguing that residents could still live at the properties despite water inundation to the basements.

The claimants provided the Australian Financial Complaints Authority (AFCA) with a report from an insurer-appointed hygienist that said the building was “grossly contaminated” and potentially contained pathogenic and toxigenic agents that could cause “significant adverse reactions if contacted or consumed”.

The hygienist deemed the property unliveable, declaring that it should not be entered without wearing appropriate safety gear.

The ombudsman agreed with the report’s assessment, saying that the building “was not in a safe condition which could be reasonably leased or rented by tenants”.

IAG argued that the landlords did not have a valid claim for rental loss because the property had been unoccupied at the time of the event and therefore suffered no rental losses.

The ombudsman noted that the landlord insurance policy did not require the property to be tenanted and was applicable to buildings that were deemed unliveable “as a result” of accidental losses.

The claimants said they were in the process of renting the property and had signed an exclusive authority with an agent on October 4.

The ombudsman noted that the property was not advertised before the claimed event occurred and said it was “unclear” when tenants would have occupied it.

The ruling instead relied on examples from nearby properties to determine at what point it would have been rented.

It said “despite the limited information”, the building “would have likely” been leased by December 17, noting the likelihood that the complainants and agent would have sought tenants before the Christmas and New Year period.

It required the insurer to provide the homeowners with a six-week allowance for the properties’ insured amount of $1500 a week and pay interest from December 23 last year until the claim is settled.

Click here for the ruling.