Homeowner’s insurance – Beware of wear and tear

In 2018, 58% of complaints considered by the Ombud for Short Term Insurance (OSTI) under homeowner’s insurance related to claims for damage caused by acts of nature. These claims relate primarily to storm related loss. According to Ayanda Mazwi, a senior assistant Ombud, the primary cause for complaint, at 48%, was the rejection of claims on the basis of the condition of the property, this being wear and tear, lack of maintenance, defective design, construction, workmanship and building material.

This was also the case in 2017. According to the report this rejection reason causes consumers a lot of unhappiness. It is however the insured’s contractual responsibility to ensure that the building structure is properly maintained and is in compliance with applicable building regulations. If the damage claimed for is attributed to the condition of the property, the policy may not respond, even if an insured event did occur.

A case study published in the recent OSTI Briefcase illustrates that wear and tear is not covered.

Summary of the claim and complaint

Ms M, owner of s sectional title unit, submitted a claim to the insurer for water damage to the cupboards, a wall, tiles and an electrical plug.

Ms M discovered that the unit above hers had suffered a burst pipe which led to her own unit becoming flooded and it resulted in damage. The repairs were only done to the pipe about six hours later.

The policy was taken out by the body corporate and provided cover for the various units forming part of the sectional title development as well as the common areas.

The insurer declined liability for the claim on the grounds that the pipe had burst as a result of wear and tear. The policy did not cover damage caused by wear and tear, gradual deterioration and gradually operating causes. The policy also did not provide cover for resultant damage.

According to the insurer the nature of the damage found at the time of assessment was clearly not consistent with water damage. Instead it was due to the incorrect application of tile adhesive and incorrect installation of the tiles according to the assessor’s report.

OSTI’s consideration

In deciding the matter OSTI also considered another quotation which stated that damage had been caused when accessing and repairing the burst pipe.

An additional quotation received by a service provider appointed by the insured stated that “damage was caused by a burst pipe in the kitchen and flooded the complete unit. Tiles are discolouring where the water was lying and cracking.” It was however not clear whether the observation was made by the contractors themselves or was merely what they had been advised of. It was probably not the contractors’ own assessment, as the burst pipe was not even in the same unit, but the unit above.

As a result, the report by the insurer’s assessor was more compelling as it explained why the damage was attributed to causes other than insured risks.

OSTI was therefore unable to assist Ms M and the dispute was resolved in favour of the insurer.

“If the damage you claim for is attributed to the condition of your property, you may not receive payment, even if the event that leads to the claim would ordinarily be covered in your insurance policy”, Mazwi also warned consumers in OSTI’s annual report.

It is clear that consumers do not always know or understand the material terms and conditions contained in their policy documents. This highlights the need for policy documents to be drafted in clear and simple language, as well as clearly explained in the sales process.

Click here to download the case study.

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