Homeowner who ‘fell through bathroom floor’ can’t claim full insurance

A man in New Zealand fell through his bathroom floor after discovering water damage, highlighting a growing issue with insurance coverage for gradual damage, according to the Insurance and Financial Services Ombudsman. The incident, along with a separate case involving a couple, underscores disputes over policy limits and the distinction between sudden and gradual damage.

The man reported significant water damage under his bathroom tiles, prompting an insurance claim. While the insurer acknowledged a leak, it classified the damage as gradual, capping the payout at $2,000 to $5,000, the standard limit for such cases. The policy only covers sudden leaks from internal water systems, not prolonged issues. The man argued the damage was sudden, but the ombudsman ruled in favor of the insurer, citing evidence of a hidden leak and mold that developed over time.

A separate case involved a couple whose storm-related claims were denied. The insurer rejected their claim, stating the damage—cracks, fallen tiles, and a benchtop gap—stemmed from long-term ground movement and pre-existing issues, not the storm itself. The ombudsman agreed, noting the storm had merely exposed existing problems.

This financial year, 6% of disputes investigated by the ombudsman involved gradual damage, up from 5% the previous year. Ombudsman Karen Stevens emphasized the gap between consumer expectations and policy coverage, stating that damage must be caused suddenly, not discovered suddenly. She warned that unresolved leaks could lead to uncovered, more severe damage.

Insurers typically categorize damage occurring outside a 72-hour window as gradual. Both cases highlight the challenges homeowners face in navigating policy terms, particularly with hidden issues like internal guttering that delay problem detection.

Homeowners facing denied claims are advised to seek expert evaluations to determine the cause and timing of damage. The ombudsman recommended engaging professionals to strengthen disputes, particularly when linking weather events to damage.

Industry observers suggest insurers may adjust policies to address rising disputes, though no changes were mentioned in the source. The focus remains on clarifying coverage terms and improving consumer awareness.

What is gradual damage in insurance terms? Gradual damage refers to issues developing over time, such as leaks or mold, which insurers often cap at $2,000 to $5,000, unlike sudden damage covered under standard policies.

Why were the couple’s claims denied? The insurer and ombudsman determined the damage resulted from long-term ground movement and pre-existing issues, not the storm, which was deemed a contributing factor rather than the cause.

How can homeowners dispute gradual damage claims? Engaging experts to provide evidence on the damage’s origin and timing is recommended. Insurers typically require a clear link between a weather event and the damage, with issues predating the event often excluded.

How might insurance policies evolve to address these disputes in the future?