A property owner who arranged repairs to a leaking pipe before notifying her strata insurer has won a claims dispute after the complaints authority found she did not prejudice the company's ability to make a payout decision.

The claimant called in a plumber to investigate after the pipe began leaking within its concrete slab, causing water damage and mould growth in August 2022. The plumber saw the pipe expanding and contracting but could not determine what had caused it to burst.

The plumber told the complainant a rerun – a procedure to install a new plumbing line – was the “only viable option to repair or replace the damaged pipe”.

The insured authorised the urgent works. A few days later, she lodged a claim for the property damage and repairs, which she said amounted to accidental damage under her strata insurance policy. 

XL Insurance Company accepted the water damage claim but declined to cover the replacement costs, arguing it had been prejudiced in assessing its liability for the work because it had been completed without its consent. 

The insurer said it was unable to establish if the leak was caused by factors excluded under the policy, and the complainant had breached procedure conditions.

The claimant referred to the plumber’s report, which said the work was necessary to prevent further ingress through the ceilings of units below. 

The Australian Financial Complaints Authority acknowledges the insured completed the work without the insurer’s consent, but says this did not affect the insurer’s ability to assess the claim. 

The authority says the insurer was able to inspect the leaking pipe, which remained at the property, and could have conducted diagnostic work to determine why it began to leak. It also notes the plumber was willing to discuss the matter with the insurer.

The ruling says the burst pipe was probably “unexpected and unforeseen” and met the definition of accidental damage.

“The complainant acted reasonably to prevent further damage and did not prejudice the insurer’s ability to assess its liability.”

The authority has also dismissed the insurer’s contention that the rerun did not meet the policy’s definition of “replacement”, saying the new pipe serves the same purpose as the damaged one.   

Click here for the ruling.