Complainants who sought cover for water and mould damage caused by a leaky pipe will be compensated after successfully challenging their insurer’s application of a policy exclusion relating to wear and tear. 

The homeowners lodged a claim after discovering the damage, which included a waterlogged carpet and mould growth in one of their bedroom wardrobes. 

A report from an investigator found that the leak stemmed from a supply pipe in the toilet, noting that the water had been “hissing in the walls”.

Suncorp declined the claim, saying that the damage had been ongoing for at least two to three months since the claim was first filed and was due to a “combination of factors”, including grout missing between tiles in shower screens and shower spindles not silicone sealed.

It says the insured’s home insurance policy included exclusions relating to “wear, tear and gradual deterioration or loss or damage as a result of a gradual process of liquid leaking, splashing, dripping or overflowing”. 

The Australian Financial Complaints Authority (AFCA) said that exclusion, in the context of wear and tear, typically relates to factors that occur over an extended period of “months, if not years” rather than “within a short space of time, such as days, weeks or even a month or two”. 

It says that the insurer’s contention that the leak had been dripping for months had been inconsistent with the findings from the investigator who reported the “hissing” sounds of water damage.

AFCA says that any “hissing” supply pipe would likely result in a “fair amount of water” escaping over a short amount of time as it would continually leak compared to a pipe that would only leak when it was in use. 

“The insurer says the damage likely occurred over months. I am not persuaded by this,” AFCA said.

“It is unclear how it can accurately estimate the timeframe in circumstances when it is not clearly established how much water was leaking from the pipe.

“It is conceivable this would result in damage in days, maybe weeks. Further, it is not clear why mould would not manifest relatively quickly in a wet and poorly ventilated environment.”

The ruling required Suncorp to accept the claim for the damage caused by the leaky pipe and award the complainants $500 for non-financial losses relating to delays in communication.

The dispute reflects a growing issue raised by a recent Code Governance Committee (CGC) inquiry, which reports that too many insurers are relying on wear and tear exclusions to deny home insurance claims. The Insurance Council of Australia announced yesterday that it will review the findings from the CGC inquiry. 

Click here for the ruling.