Recent complaints about the appropriate level of insurance cover for methamphetamine damaged properties, highlights the importance for landlords and insurance brokers to continually review whether insurance policies are fit for purpose.
Dispute resolution service Financial Services Complaints Limited (FSCL) has noticed a spike in complaints, which typically see landlords shocked to discover they are not adequately covered, when needing to claim.
“These cases highlight how important clear communication is and that both the policy holder and adviser are on the same page when it comes to understanding what is and isn’t covered and whether or not the level of cover is appropriate,” explains FSCL CEO, Susan Taylor.
In the most recent complaint, Rawiri was alarmed to find that he was unable to make a $20,000 claim for damage caused by methamphetamine contamination at one of his three rental properties.
In 2014 Rawiri engaged an insurance adviser to help him get the right cover for his needs. Rawiri was advised to take out home insurance policies, with additional landlord’s cover, for each of his properties.
When the policies renewed each year, Rawiri’s adviser sent him his new policy schedule and policy wording. In 2016 Rawiri asked his adviser if he was covered for methamphetamine contamination because he noticed that this kind of damage was becoming more common in New Zealand.
Rawiri’s adviser said there wasn’t specific cover for damage caused by methamphetamine contamination under his policies, but that this type of damage would be covered in line with his policy terms.
In 2018, Rawiri’s insurer made some changes to their home insurance policy, including introducing specific cover for methamphetamine damage. Then in 2019, the insurer updated the policy terms again and added a new testing level threshold for methamphetamine contamination cover.
Rawiri’s adviser didn’t speak to him about the changes to the methamphetamine cover but sent him a document that explained the changes alongside a copy of the new policy wording.
In 2020, when Rawiri had a property tested for methamphetamine contamination after his tenants moved out, testing showed methamphetamine contamination in a few different areas of the house.
Rawiri arranged for the property to be decontaminated, and he re-carpeted and re-painted the entire house. When his claim was rejected, Rawiri’s adviser told him that the methamphetamine contamination level at his property didn’t meet the required testing level specified in his policy, so the claim for the testing and decontamination work would not be covered.
Rawiri thought his broker had been negligent in recommending a policy with a high methamphetamine contamination level threshold. The adviser didn’t think he’d done anything wrong. He said that Rawiri’s policy wording described the details of the methamphetamine cover, and he had sent Rawiri a document that explained the changes the insurer made to the methamphetamine cover in 2019.
FSCL noted that Rawiri’s broker didn’t speak to Rawiri about the changes to his cover, but he did send him a ‘summary of changes’ document which explained the new methamphetamine testing level requirement.
However, FSCL also took into consideration the fact that Rawiri had raised concerns with his broker about methamphetamine damage in 2016, showing that he was particularly concerned to have cover for methamphetamine damage, and the broker had sent Rawiri a link to the incorrect policy wording in 2019.
FSCL concluded the broker should be responsible for covering some, but not all, of Rawiri’s claim for methamphetamine damage.
Ms Taylor advises that it is important for consumers to compare cover between different insurers and to seek expert advice, especially if they have complex needs, or find the different policies difficult to understand.
“For landlords in particular, damage caused by methamphetamine contamination may be something they want to be insured for. In New Zealand, there are two sources of information which have different views about what level of contamination creates a health risk – which means that insurers follow one of the two standards,” explains Ms Taylor.
“When looking at taking out a policy, it is a good idea for a policyholder to check which contamination standard the insurer uses, so that they are aware of the level of coverage they will have.”
