Homeowners who claimed for water damage caused by a leaking bath tap have won their dispute after an Australian Financial Complaints Authority (AFCA) decision found their insurer could not rely on policy exclusions to decline the claim. 

The complainants lodged the claim in July 2020 after noticing water inundation to a walk-in wardrobe and walls shared with their ensuite. They told Suncorp they had been unaware of when the water first appeared but noticed damage to the walls, flooring and carpet.  

A leak location report from a Suncorp-appointed builder, referred to as AB, attributed the damage to a leaking bath tap as well as the cracks in the tub located in the ensuite.   

The claimants admit there had been “faint cracks” in the tub since they first bought the home but say there had never been leakage issues occurring previously.   

They highlighted that a builder, referred to as WKD, which had been engaged to renovate the home last year, found “no signs” of water leakage from the bathtub and that photos of the underside of the tub showed that there had been no cracking underneath.   

WKD reported that water leaking from the tap, not the tub, appeared to be the source of the damage, noting that mould had been concentrating around the faucet while the cement underneath the tub remained dry.  

AFCA agreed that WKD’s findings appeared more accurate, noting that the builder had been able to see underneath the tub while it was removed, whereas AB had not.   

It also acknowledged photographs that showed water damage around the walls of the bath tap appearing much more severe compared to the walls near the tub.   

“Having considered the information provided by both parties, I believe all the damage can be explained by water leaking from the tap,” AFCA said.  

“The bathtub may not have leaked, and if it did leak, the water leaking from the tub may not have caused any significant damage.”  

But Suncorp says that the damage, even if it had occurred from the tap, was excluded from cover under a policy exclusion relating to gradual leaks. The exclusion states that instances the insured can “reasonably be expected to be aware of” would not be covered.   

The insurer notes that both parties agreed that the damage had not been recent and said the smell of mould from the water ingress should have been noticeable.  

The claimants say that the area had been filled with cardboard items, most of which had absorbed and concealed the damage. They also say the mould did not have a strong smell and was only recognisable if they were very close to the carpet.   

AFCA agreed that it was reasonable for the policyholders not to have been aware of the damage because the area had been primarily used for storage and relatively untouched for months.   

“The complainants could not reasonably be expected to be aware of the leaking tap when it began, because it was inside a wall,” AFCA said.  

“I am not satisfied they could reasonably be expected to have been aware of the leak any earlier than they were. In my view, the insurer has not established the application of this exclusion.”  

AFCA also shot down the insurer’s application for a policy exclusion relating to leaks from a shower part, saying that the tap had been part of the bath.   

Additionally, the ruling did not find that the policy’s wear and tear exclusion applied to this matter because the tap’s leaking had not been linked to the deterioration of the item, despite it occurring over time.   

“The insurer has not established the application of any relevant policy exclusion,” AFCA said.  

“At first glance, it appears there are several policy exclusions that could apply to the claim. However, a careful reading of each policy exclusion shows none of them apply.”  

AFCA acknowledged that there had been insufficient information to determine the value of the contents damage and that Suncorp should obtain quotes from experts to determine its liability for the claim.  

It says that the insurer should “fairly consider” any quotes provided by the homeowners and that if there had been disagreements about a settlement, the policyholders were entitled to lodging a separate complaint.  

Click here for the ruling.