A Victorian homeowner who sought cover for cracking and movement damage to her property following an earthquake will not have her claim paid after a dispute ruling backed her insurer. 

The insured reported the damage following a 5.9-magnitude that hit the state in September 2021. She says the damage had an significant impact on the property’s value and demanded QBE pay her $260,000 for the loss, as well as for costs associated with professional fees and denied access to temporary accommodation. 

QBE declined the claim following the findings of its engineer, referred to as MC, which reported the damage to be consistent with pre-existent issues relating to the soil moisture of the building’s foundation that had been “exacerbated by inappropriate repairs and upgrades”. 

MC noted that during the quake the property would have experienced weak to light shaking as per the Modified Mercalli Intensity (MMI) scale, which it says would have been “insufficient to cause the observed damage”. 

The engineer also highlighted that a property may experience “earthquake-induced damage”, in which, following an event, pre-existing issues and faults are more likely to be exposed.

The insurer obtained a second report from an engineer called SE after the complainant disagreed with its claim denial decision.

SE’s report supported the initial findings, noting that the damage came from a “combination of factors” including undersized concrete footings, elevated moisture levels, and incorrect insulation of parts of the brickwork. 

QBE also provided the opinion of a third engineer, referred to as RB, after the complaint had been filed with the Australian Financial Complaints Authority (AFCA). 

RB reported that the loss had been “consistent with infiltration of water to the subfloor over a long period,” and that the pattern and location of cracking had not been typical for earthquake damage. 

The complainant’s engineer, referred to as AD, provided its own report as well as two rebuttal reports to the insurer’s experts, identifying the extensive movement in the property’s internal and external framing as consistent with seismic activity. 

The policyholder also relied on a statutory declaration from her builder, who identified the damage as “caused by extreme vibration or ground movement”.

But AFCA says it was not convinced by the claimant’s argument, noting that AD’s responses to the insurer’s experts failed to explain how the earthquake could have had such a devastating impact given the distance from the quake’s epicentre.

“As the complainant’s property was 126km from the epicentre, the shaking on the MMI scale would have been MMI III (weak) to MMI IV (light),” AFCA said.

“AD has not addressed the MMI scale. Nor has it adequately explained how an earthquake could reasonably have caused the inconsistent pattern of damage at the property.”

AFCA acknowledged that various factors, including the quake, may have played a role in the emergence of the cracking and movement but favoured the assessment of QBE and its experts in identifying the most likely cause of the loss.

“It is more likely than not the damage claimed is not due to the earthquake but is from excluded causes,” AFCA said. 

“Even if the damage was not observable before the earthquake, that is not enough of itself to prove the earthquake was the proximate cause.”

“As MC, SE and RB indicate, it may have exacerbated pre-existing issues, but it was not the primary cause of damage.

“The insurer is entitled to deny liability for the damage and the temporary accommodation costs sought.”

The ruling also did not require the insurer to pay the costs associated with the claimant’s professional fees.

Click here for the ruling.