In 2022, water entered Deepak’s apartment and his tenants had to move out. The body corporate for the apartment building claimed on their insurance policy for the repairs, and the loss of rent Deepak suffered while the apartment was untenanted from July to December 2022.
The body corporate arranged the repairs, which took some time because of a shortage of contractors to carry out the repairs. The insurer then assessed the claim and discovered there had been similar water ingress issues at Deepak’s apartment in 2021. Although the insurer was prepared to pay some of the (minimal) repair costs, the (more expensive) loss of rent claim was declined. This was because it appeared the water ingress problem had been pre-existing.
Then the Auckland anniversary weekend flooding event occurred in January 2023. There was further water ingress to Deepak’s apartment, and some of the apartments next door to his. The body corporate again claimed for the repair costs and loss of rent. Again, the insurer agreed to pay the minimal repair costs but declined the loss of rent claim.
Deepak complained to FSCL about the declined loss of rent claims.
Dispute
Deepak considered that both loss of rent claims should be paid. In particular, he pointed out that, following the Auckland flooding event, other apartments close to his had their loss of rent claims paid. He could not see why his claim hadn’t been paid.
The insurer said both loss of rent claims were declined because the water ingress problem was pre-existing. The insurer also said that there had been no steps taken by Deepak / the body corporate to fix the problem.
Review
We agreed with the insurer that there was no cover for the 2022 loss of rent claim, because there was evidence of a water ingress problem in 2021 which had not been fixed. We explained to Deepak this meant the water ingress in 2022 could not be considered ‘unintended or unforeseen’, and there was no cover. Deepak accepted this.
We then reviewed the circumstances surrounding the Auckland flooding event. Deepak provided us with evidence that the repairs carried out by the body corporate in late 2022 had completely fixed the pre-existing problem. This meant that the Auckland flooding event was a new event causing water to enter his apartment, and we said that the claim should be covered. This was particularly because other apartments had their loss of rent claims paid.
We noted that the insurer considered that the water ingress following the Auckland flood event was related to the pre-existing issue, so they had not sent an assessor to the apartment. This meant that the insurer had no evidence to counteract the body corporate’s evidence that the pre-existing problem had been fully rectified.
The insurer also argued that the water ingress following the Auckland flooding event was not severe enough to mean that the apartment was uninhabitable for 17 weeks. Again, because there was no assessor’s report, the insurer had little evidence to rely on. Deepak was able to provide evidence from the building manager that his apartment had in fact been uninhabitable for 17 weeks.
Resolution
We decided that the insurer should pay the second loss of rent claim which, at 17 weeks of lost rent, was $8,500. The parties accepted our decision and the complaint was resolved.
Insights for insurers
In this case, it appeared the insurer was confused by there being two loss of rent claims within a short period of time. They assumed the 2022 and 2023 water ingress issues all related to a pre-existing problem. They didn’t look at whether the existing issue had been repaired, and so didn’t have an assessor consider the second claim. If the insurer had done this, the complaint could have been avoided.
