A Melbourne homeowner has been awarded a full payout for earthquake damage despite insurer Chubb’s protests that pre-existing issues contributed to the loss.  

The policyholder lodged a claim for cracking on the inside and outside of her property and the partial collapse of some ceilings after the September 2021 quake.

The insurer’s engineer inspected the property that October and found minor cracking in brickwork, plus separation between older and newer parts of the house.  

They said the damage had “origin in latent conditions that existed before the insured event” and would have been likely to occur anyway at some point. However, the engineer acknowledged it was “highly probable” the quake accelerated and exacerbated the damage.  

“There are a several locations where a considerable amount of cracking may have occurred in this house and I would accept that some of it is due to the earthquake,” the engineer said.  

The engineer reinspected the property in March 2022 and said previous installations in the home had left it more vulnerable to quake damage. They also noted that poorly actioned make-safe work by the insurer’s builder was likely to cause more damage to walls and ceilings.

Chubb appointed a second engineer, who agreed that cracking “developed over an extended period of years” and quake damage occurred due to the home’s “weakened and brittle nature”.  

The insurer agreed to partially cover the claim, but said it was not liable for areas damaged due to “instability of the footings and piers and the excessive movement damaging the brickwork”.  

The claimant argued all damage should be covered, noting the insurer considered the home in “good condition” when it inspected it in January 2020.  

She engaged consulting engineers who noted the cracking had worsened since the quake and that “without the influence of the earthquake, there would be no reason for such extensive damage”.  

These engineers also appointed a plumber, who found earthenware sewage pipes had been leaking underground, causing excessive soil moisture. The plumber said the leak had probably been occurring for at least 10 years but was exacerbated by the quake.

In a dispute ruling, the Australian Financial Complaints Authority notes the evidence of several causes of damage, but agrees the quake was the major contributor.  

Its panel says all the experts considered, to varying degrees, that the quake contributed to most of the cracking.  

“The coincidental timing of the emergence of the damage shortly after the earthquake happened adds weight to the earthquake being a significant cause,” it said.  

The ruling finds pre-existing issues “would not have caused the majority of the cracking and the separation of the rear section of the house in the absence of the earthquake, at least for a period of some five to 10 years hence”.  

Chubb must accept the claim and arrange a quote based on a scope of works by the first engineer.  

It must also arrange temporary living expenses for the complainant and her family, cover up to $5000 of her professional costs and be liable for ceiling damage caused by poor make-safe work.  

See the ruling here.