A policyholder who lodged a claim after noticing a possible sink hole forming under a property passageway has failed to win cover after the damage was assessed to be a long-term issue caused by gradual deterioration and wear and tear. 

The Australian Financial Complaints Authority says available information shows damage was occurring for several years and “most likely” dated from before the business pack policy was taken out. 

Insurer AIG provided reports from a loss adjuster, plumber and engineering consultants in support of its decision to decline the claim. 

The loss adjuster said the damage appeared to pre-exist the December 2022 claimed date of loss and the initial policy coverage, while the plumbing report found water damage to two rooms was due to inadequate subfloor ventilation and a condensation drain discharging into the subfloor. 

Engineering consultants concluded the damage related to issues including inadequate subfloor ventilation, discharge from the condensation pipes, inadequate floor waste installation and inadequate cool room sealing and insulation. 

The consultants said it would have taken several years for the extent of decay and deterioration to have developed. 

The complainant provided repair invoices from two consultants and a letter from his regular maintenance and building contractor in support of his case. 

The ombudsman says the information doesn’t provide anything persuasive that may assist in establishing the cause of the damage, with the details focusing more on repairs completed and the complainant regularly maintaining the property and not being aware of the damage. 

But the decision says that while “it may well be the complainant was not aware” of the issues, that does not prevent the insurer from declining pre-existing damage. 

Reports provided by the insurer clearly show the significant degree of deterioration, rot, moisture damage and wear and tear to the timber structure and flooring at the insured property, the decision says. “I am satisfied it is fair to accept this damage is consistent with having occurred over several years and not due to a single recent event,” the ombudsman says.  

The deterioration, rot and mould are so significant that the timber bearers and floor joists appear to be disintegrating and falling apart/down, while the brickwork also presents evidence of rising damp and efflorescence, it says. 

The authority says the damage pre-dates the policy, while it is also fair to accept it was consistent with long-term gradual deterioration and wear and tear, which is excluded. 

Click here for the ruling.