A trust held house insurance for a rental property.
In March 2017, the trust made a claim to the insurer, because methamphetamine testing had shown a composite test result of 66µg, well over the threshold requiring remediation at the time of 0.5µg. The trust made a claim for $50,504.71 for remediation of the methamphetamine contamination and loss of rent (“the claim”).
In April 2017, further testing at the house found levels of methamphetamine contamination in each room of the house of between 4.4µg and 100µg (on a kitchen cupboard).
In this case, the tenant had lived at the house since 2012 and there was some evidence provided that, in about September/October 2016, the tenant’s wife and child left the house and there began to be an increase in visitors and night-time activity at the house. The landlords also provided some evidence of a freshly painted patch on the ceiling above the oven and further methamphetamine testing was performed in the kitchen, which returned a level of 29µg on the kitchen wall.
The insurer declined the claim, on the basis that the trust was unable to prove the methamphetamine contamination was “Sudden and unforeseen accidental physical … damage”.
Based on the evidence relating to increased visitors and other tenants at the house, the insurer believed it was more likely the damage occurred over time, particularly between September/October 2016 and late April/early May 2017, indicating a gradual process.
The case manager’s assessment
At law, the trust had the prima facie obligation to prove that the damage, in this case methamphetamine contamination above the recommended level (at the time) of 0.5g/100cm², was “sudden”, which has been held by the courts to mean “‘abrupt’, ‘all at once’, ‘instantaneous’”. If the damage is caused by a single event, such as manufacture or a group of people smoking methamphetamine at the same time, then it could be considered “sudden”.
The insurer believed that the evidence indicated the damage was not caused suddenly and the contamination more likely occurred gradually over time.
Following discussions between the case manager and the insurer, the insurer agreed that the IFSO Scheme would obtain an expert opinion about the most likely cause of the methamphetamine contamination, on the balance of probabilities.
In July 2018, the case manager obtained an expert opinion, which stated that the levels of methamphetamine found at the house, together with the information provided about the tenant and the kitchen, indicated that the damage most likely occurred “as a result of a single event, namely manufacture”.
The insurer agreed to pay the claim amount, in full and final settlement of the claim.
