Question:
We have a client that has discovered gradual damage due to a fault in the shower mixer. There has not been any visible signs of any damage until the client pulled some furniture out from a bedroom wall. At this stage, visible signs of some water damage was found. Further investigations are happening as to any potential damage within the wall itself.
Hidden Gradual Damage clause is as follows:
You are insured for:
1. hidden gradual damage to any insured property that happens and that you discover during the period of insurance, and
2. any other part of any insured property that is not directly affected but must be removed, damaged or destroyed to locate the cause of the hidden gradual damage.
The most we will pay during any annual period is:
1. $10,000 for each event, and
2. $30,000 for all events.
The insurer is saying even though the damage found in the bedroom was not visible until they pulled the furniture out, they are saying that because it was not technically hidden within the wall, they would not cover the bedroom wall damage. They may still cover any damage within the wall itself.
Is the insurer correct?
Crossley Gates replies:
Assuming the words 'hidden gradual damage' are not specially defined, they will be interpreted based on their dictionary meaning and in the context of the policy.
The definition of hidden is clear; the issue raised by the insurer seems to be whether the definition is to be restricted to damage hidden behind a wall, meaning damage showing on the outside of the wall, but hidden behind furniture is not enough.
The word hidden appears in what is the insuring clause of the extension. Other requirements of the insuring clause such as the need for the damage to be accidental are looked at subjectively through the insured's eyes. Therefore, applying the same subjective test to the requirement of being hidden is consistent with this.
I also note that the interpretation contended for by the insurer is adding a gloss to the dictionary meaning that is not justified. If the cover is meant to be limited to damage hidden behind a wall only, the insuring clause could easily say so.
Based on the words used in the extension, I don't believe the narrow interpretation used by the insurer is justified. The damage to the wall and beyond was hidden to the insured by the furniture.
