What happens if the insurer’s standards of restoration are not ‘up to scratch?’

Jenny’s tenant lived alone. The tenant died but her body was not found for five weeks. The smells and fluids associated with the process of body decomposition were a bio-hazard. The effects of decomposition effects caused extensive damage to the apartment. Jenny claimed for the costs of restoration under her insurance policy. 

In consultation with Jenny’s insurer, a cleaning company (C1) was appointed to carry out the necessary remedial work. This task was done to a poor standard and the initial cleaner ripped up the floor before abandoning the job. In doing so, the cleaner left the fridge and microwave open, further exposing surfaces to toxic matter.

An independent assessor verified that little, if any, of the agreed cleaning and repainting had occurred and another cleaning contractor (C2) was appointed to finish the job. There was some disagreement between Jenny and the insurer as to the appropriate level of cleaning and remediation necessary to restore the apartment to a liveable condition.

Worried about the future liveability of the apartment, Jenny engaged a specialist cleaning agency (C3) who had experience in cleaning of this nature to assess the necessary next steps. C3 stated that most surfaces, including benches, cupboards, drawers and the wastemaster needed to be replaced.

By this time the insurer had already agreed to replace the apartment’s carpet, kitchen floor, curtains and blinds, as well as the repainting of the property. The complaint arose because the insurer believed a thorough specialist’s clean of the kitchen would suffice. Jenny believed the kitchen also needed replacing.

Because of the kitchen’s layout, the replacement of these surfaces meant that the entire ‘kitchen frame’ would have to be removed.

When the insurer was not willing to pay the costs of replacing the entire kitchen, Jenny complained to FSCL. 


Insurer’s view

The insurer thought that the surfaces of the bench and cabinets needed to be thoroughly cleaned rather than replaced. Having read the report from C3, the insurer agreed to replace the benchtops but disputed the manner in which they would have to be replaced. The insurer believed that portions of the bench (where food preparation occurred) could be cut out and replaced with ‘like for like’, so that the attached cabinets would not need to be replaced.


Jenny’s view

Jenny wanted her property fixed quickly and to a desirable standard. Because the apartment was a revenue stream for Jenny she wanted to ensure that the work was done to an acceptable standard in order to prevent future inconvenience and allow her to let to new tenants. Jenny, in consultation with a kitchen outfitter, believed that the entire kitchen would have to be re-fitted in order to replace the benches and cabinetry. 



We negotiated a settlement between Jenny and her insurer. We were able to illustrate to the insurer, with reference to the ‘unharmed property’ provision of the policy, that the incidental repairs associated with replacing the benchtops were covered. This stated

If for the sole purpose of reinstating insured property damaged by an insured peril, it is necessary to demolish, damage or remove any part unharmed by that peril, the company will indemnify the insured.

The company will also indemnify the insured for the cost of reinstating the property to a condition the same as, but not better nor more extensive than its condition immediately prior to the damage

Having received confirmation from the kitchen outfitter, who had extensive experience in custom kitchen making, that it would not have been possible to remove the bench tops without gutting the kitchen, the insurer agreed to pay the costs associated with the complete refitting.

Because it was agreed by both parties that the new kitchen resulted in Jenny’s property ending up in better condition than prior to the damage, a 15% reduction by the insurer for the cost of the kitchen was agreed upon. This reflected the extra costs involved for the insurer, and the additional benefit in replacing old for new for Jenny.


Key insights for consumers

Insurance companies strictly apply their policy wording. It is important to keep in mind that very often what is a ‘fair’ outcome will not necessarily be covered under the specific wording of the policy.