A landlord has lost a claim dispute with Suncorp after her tenants smoked methamphetamine, causing dangerous chemical contamination of the walls, ceilings and other surfaces.

The property owner held landlord insurance with Suncorp and lodged a claim for loss of rent and the cost of rectifying the uninhabitable property after the tenants vacated in March last year.

The house required extensive repairs, including replacement of the air-conditioning unit and decontamination of the walls, ceilings, windows and window frames and re-painting. The landlord argued the tenant’s actions had been deliberate and committed with malice.

Suncorp accepted some damage was malicious, agreeing to cover holes kicked or punched in walls, cracked doors and the removal of carpet by the tenant, as well as $2800 for loss of rent, which was the maximum under the policy. Suncorp also identified theft and broken glass as areas it was liable if the woman were to claim.

However, Suncorp denied the balance of her claim on the basis the contamination was caused by methamphetamine use, rather than production. This meant it was not "malicious" under the terms of the policy, the insurer said.

The Australian Financial Complaints Authority (AFCA) agreed Suncorp was entitled to deny liability for contamination remediation, associated damage and removal of debris.

“Even if that was in breach of the tenancy agreement, that does not mean the resulting damage was malicious,” AFCA said.

AFCA said the tenants appeared to have smoked the drug “not caring whether it caused damage or not”.

“Malice involves an element of intent and I do not consider it has been shown they used the drug with the intention of causing damage,” the ruling states.

“The complainants have not established a valid claim for malicious damage in respect of the methamphetamine use, although other areas of the property had suffered malicious damage and Suncorp is liable for that.”

Residue from consumption of ice through smoking has been linked with organ damage and reproductive issues and other ill effects, with children particularly at risk. Remediation can be expensive, ranging from a chemical clean and removal of soft furnishings to major reconstruction.

The landlord’s Suncorp policy covered malicious acts or vandalism by tenants or their guests.

Optional cover was available for accidental damage by tenants or their guests, however she did not select that option.

An expert assessment report concluded the majority of the damage was due to poor housekeeping and tenant neglect. Methamphetamine contamination at concentrations exceeding government guidelines was detected in the kitchen, lounge, bedroom and a sun room, and the property was deemed not suitable for occupancy and requiring remediation prior to re-occupation.

However, there were no traces of ephedrine and pseudoephedrine detected. That made it unlikely methamphetamine was manufactured there as these chemicals are present before the drug is deemed “cooked” and ready to be smoked.

“The contamination is more likely from use,” AFCA said.

A hygienist report said there was a “pungent/musty malodour” present on entry to the residence but found no materials, equipment or chemical drums associated with the manufacture of stimulants, finding only a “suspicious item” with the potential to be considered drug paraphernalia on a kitchen shelf.

The landlord’s neighbours told her the tenants were manufacturing and selling methamphetamine from the property and there were chemicals left inside, but she accepted the expert evidence did not support that.

“It is more likely than not that the methamphetamine-related property damage … was from tenant neglect and their untidy and unhygienic habits, which is a policy exclusion,” AFCA said.

The policy stated it did not cover the cost of “cleaning, repairing or restoring your property or contents caused by neglect, or untidy, unclean or unhygienic habits of the tenant or their guests, such as the cost of cleaning, repairing or removing liquid (including urine) or food stains, odours, abandoned items or rubbish”.

“Decontamination is the responsibility of the complainant,” AFCA determined.

See the full ruling here.