The devil’s in the definitions

Edwyna was working on her yacht in late 2015, when she discovered a leak. She found the sealant around the hull of the boat was failing, so she taped up the seals as a temporary measure, and contacted her insurer.

The insurer sent an assessor to examine the boat. The assessor confirmed that the hull sealant was failing, and organised repairs for both the boat’s sealant, and its timbers, which had been damaged by the water leaking inside the boat. The repairs were finished in October 2016.

Edwyna’s insurance policy lapsed the next month, in November 2016.

 

Second leak discovered

In January 2017, after some particularly heavy thunderstorms, Edwyna discovered further leaks. Water was entering the boat again and damaging the internal timbers. Edwyna’s insurer arranged another assessment, but this time the insurer declined Edwyna’s claim.

 

Dispute

The insurer said that Edwyna’s policy had lapsed by the time the second series of leaks had occurred. It said Edwyna had no cover for the damage caused by the later leaks.

Edwyna said the second leaks only occurred because the insurer hadn’t properly repaired the sealant failure in October 2016. She said the insurer should be responsible for any damage which occurred as a result of its inadequate repairs.

 

Review

When FSCL reviewed the file, we found that Edwyna’s insurance policy did not cover defects in the boat’s construction. However, Edwyna’s policy did cover any damage caused by those defects.  This meant that, after the earlier leaks in 2016, the insurer was not responsible for fixing the boat’s sealant; but it was responsible for fixing the decayed timber and other damage caused by sealant failing.

We reviewed the assessor’s report from October 2016, and found that this had all been explained to Edwyna. Edwyna was clearly told that she, not the insurer, was responsible for fixing the sealant and stopping the leaks.

Since Edwyna’s policy had expired by the time the second set of leaks occurred, Edwyna had no cover for the damage. And since the insurer was not responsible for fixing the leaks, it was not relevant whether or not the second set of leaks was caused by inadequate repairs in 2016.

 

Outcome

We issued a formal recommendation, finding that Edwyna’s complaint should be discontinued.

 

Key insights for the consumer

This case turned on reasonably complex legal definitions in Edwyna’s insurance policy. FSCL can help you determine whether a financial service provider has made any mistakes, even where a bit of complex legal analysis is involved.