Insights for the insured
You are responsible for checking all parts of your property, including buildings, signs and other fixtures, to check that they have been adequately maintained. If a building, sign or fixture has not been adequately maintained, it may not be covered by your insurance policy. If in doubt, ask your insurer.
What happened?
In March 2022, Morgan’s business purchased a motel that had been covered by a material damage insurance policy (with a natural disaster extension) with an insurer. Morgan decided to keep the previous owner’s insurance policy, and had it transferred into her name. The insurance policy provided cover for “buildings”, including fixed signs that were located on the property.
In September 2023, a sign at the front of the motel was damaged when the metal pole that held it snapped and the sign fell onto the concrete, splitting it. Morgan notified her broker of the damage, and after some delay in gathering information, her broker lodged a claim with the insurer in April 2024. The insurer declined Morgan’s claim, explaining that the damage was excluded from cover under her policy.
Morgan complained to FSCL.
What were the parties’ views?
The insurer, relying on reports made by a loss adjuster who had assessed the sign and surrounding area, said that the damage to the sign was caused because the metal pole had not been adequately maintained, and rust and corrosion had caused the pole to snap and fall over. The insurer said that Morgan’s policy excluded cover for loss that was caused by rust or corrosion.
Morgan did not agree with the insurer’s view, explaining that the cost of replacing the sign should be covered under the natural disaster extension of her policy because the sign had fallen over due to the very high winds that evening. She said that she had only purchased the property eighteen months earlier, and the insurer had insured the sign when she took over the insurance policy. The rust had not developed during that time, so it was not fair to now say that she was not covered.
What was FSCL’s view?
We found that it was more probable than not that the damage to the sign was caused because of the rust and corrosion on the metal pole. Although Morgan was correct that there had been high winds on the evening in question, the loss adjuster’s photographs showed that the metal pole had snapped, leaving shards on the ground. We agreed with the loss adjuster that, had the sign fallen over due to high winds, we would have expected to see scarring to the ground (where the bottom of the pole lifts up the dirt or ground as it falls over) rather than it snapping. Although the damage to the sign may have been exacerbated by the high winds, the metal snapping suggested that the loss was most likely caused by the rust and corrosion on the metal pole.
We explained to Morgan that, as the insured, she was responsible for ensuring that the property was adequately maintained. We would not expect the insurer to proactively ask questions about the maintenance of the sign when the policy was assigned to Morgan. We further explained that had the condition of the sign been disclosed to the insurer when Morgan took over the insurance, it was unlikely that the insurer would have agreed to provide cover for it.
What was the outcome of FSCL’s investigation?
We suggested that Morgan discontinue her complaint. We did not hear back from Morgan, so we closed our file.
