A homeowner will be covered for mould contamination caused by heavy rainfall after a dispute ruling overturned her insurer’s decision to deny the claim.

The complainant said the mould developed after an “uninterrupted period of wet weather” in late February and early March last year, arguing the damage should be covered by the policy under the listed event of "storm".

Reports from the Bureau of Meteorology described the rainfall as an “intense” and “sustained” multi-day event.

The Australian Financial Complaints Authority (AFCA) acknowledged that the policy would generally refer to an insured event as a singular occurrence, but said this was not defined. It said it was “reasonable and consistent” with the policy’s intent to interpret the period of rainfall as a “single storm event”.

The claimant said the wet weather caused subfloor inundation and provided several expert reports identifying water ingress and elevated moisture beneath the home.

IAG said that the contamination was not caused by the prolonged rainfall but rather due to environmental factors – notably an extended period of high humidity in NSW.

An insurer-appointed assessor reported mould growth “throughout the property,” but could not identify a direct cause. The expert said there was no evidence of water entry to the home, and the building’s external walls had been correctly designed to allow water to escape.

The assessor speculated that the mould growth stemmed from either humidity, environmental factors or building design.

Reports from the insurer’s microbial consultant, referred to as RC, also noted a lack of excess moisture in the home’s walls or ceiling. RC said that the mould spores were likely to grow at times of high humidity, which the area had been experiencing.

RC identified that the building’s indoor humidity level was 81%, which was above the relative level for mould to grow, and theorised that this was the cause of the mould contamination.

The homeowner disputed RC’s findings, saying that the humidity levels were not unusual for the region and that neighbouring houses would have also experienced similar issues if this were the case.

She said that her home was not affected during previous periods of high humidity, noting a weather report which recorded a higher and more prolonged period of humidity levels in 2017.

The ruling acknowledged findings from a ventilation specialist, referred to as HS, that said the mould growth was notable in northern and western parts of the home, which were heavily inundated with water.

AFCA said the insurer did not respond to the specialists’ findings about whether subfloor saturation could have been the cause of the higher levels of humidity.

“Given the comments from HS about mould contaminating being greatest in areas with higher subfloor moisture, I accept, on balance, subfloor moisture is the contributing cause,” AFCA said

It said that while several factors likely contributed to the mould growth, if the storm did not saturate the subfloor, the damage would not have occurred.

“Having reviewed the available information I am satisfied, on balance, a storm caused saturation of subfloor soils, and that in turn caused the mould contamination throughout the property, also affecting contents,” AFCA said.

The policy contained a general exclusion for damage arising directly or indirectly from, or in any way connected with, "algae, mould or mildew, wet or dry rot, or rising damp".

But AFCA said the insurer could not rely on the exclusion.

"I do not consider the mould in this case should be regarded as itself a cause of damage," the ombudsman said. "Instead, the mould is the damage which was caused by the storm."

IAG was required to accept the claim and begin the appropriate steps of settling the claim, including undertaking mould treatment and other repairs.

AFCA also ruled that the insurer should award $750 compensation to the policyholder for non-financial losses relating to its poor “conflicting and confusing communication,” which was said to have caused “a significant degree of upset, concern and inconvenience”.

Click here for the ruling.