A property owner will be partially compensated for earthquake damage to her home after a dispute ruling found the insurer had not provided a reason to reduce its liability.

The complainant says she was at the property during the event and discovered the cracking around her apartment shortly afterwards. She lodged a claim with QBE. 

The insurer rejected the claim after relying on evidence from its experts who attributed the loss to gradual ground movement, which was excluded from its policy cover.

An insurer-appointed engineer said the cracking was triggered by “seasonal and environmental influences on reactive clay foundation soil beneath the footings that support it”.

“These soil movements have given rise to differential vertical heaving and settlement movements in the home, causing cracking and other distortions,” the engineer said.

“This movement is unrelated to the earthquake, and is very likely to continue into the future, as changes to the home’s garden environment (e.g due to tree removal and differing watering patterns) and broader seasonal variations continue to affect it.”

QBE also received an opinion from an appointed builder, referred to as BP, who said new cracks had been visible but were primarily on one side of the building, suggesting that there could have been a weak spot in the foundation. 

The builder also acknowledged that existing cracking had been “exacerbated”. The report estimated the cost of repair for the new cracking to be $17,950.

But the Australian Financial Complaints Authority (AFCA) says the insurer did not explain how the new cracking appeared immediately after the earthquake and did not establish that it came from the gradual movement. 

AFCA accepted that some cracking had been caused by ground movement, as per the experts’ assessment, and permitted the insurer to exclude that damage from its cover.

AFCA said there are difficulties in distinguishing between the old cracking and the covered cracking, given that more than two years have passed since the claim was filed, and considered it fair to award the settlement based on the builder’s initial findings. It also required QBE to pay any interest that had been incurred from the published date of the builder’s report.

“Given there is long-standing cracking, it is likely that further damage has occurred since the earthquake, which is not covered by the policy,” AFCA said. 

“It will, at this stage, be difficult to disentangle the covered damage from the damage which is not covered.

“It may be possible to better ascertain the cost of repairs with further assessments and reports, but given the delays so far, the interests of both parties in having a final resolution to the dispute, and the difficulties in assessing the damage described above, I am satisfied that it is fairest for the claim to be resolved on the basis of Company BP’s estimate.”

Click here for the ruling.