In June 2017, the insured, trustee of a trust, telephoned the insurer to arrange cover for a planned renovation of a house, including removing and replacing the roof.
He was told there would be no cover for damage resulting from the roof removal and was advised to contact an insurance broker to arrange construction cover.
In July 2017, he telephoned the insurer and was again advised to contact an insurance broker. He also arranged for an increased house size and sum insured to commence at the end of September 2017.
Seven days later, he telephoned the insurer to make a claim, because heavy rain from a storm the previous evening had caused the roof to leak.
The insurer appointed an assessor, who reported that the roof had been removed and the house had been shrink-wrapped.
High winds during the storm had caused the shrink-wrap to rip and allowed rainwater into the house, soaking the ceilings, walls and floors of the house.
The insurer declined the claim, because the damage occurred as a direct result of the roof being removed, which was excluded under the policy.
The trust argued the insurer had breached its duty of good faith, because it did not advise the trustee that any claim arising from the roof removal would be excluded and it misled him into believing there would be cover for the house during the renovations, because it increased the size and sum insured of the house.
The trust believed the insurer should have advised the trustee to arrange other house and contents insurance during the renovation, not just construction insurance.
The case manager’s assessment
The insured had to prove a prima facie claim that he had suffered “sudden and unforeseen accidental physical loss or damage”.
The storm had caused the shrink-wrap around the house to rip and allowed water into the house. The insurer had to prove that the policy exclusion for loss, damage or claims “arising from … structural alterations or repairs including the removal or alteration of the roof” applied, in order to decline the claim.
According to the ANZ Insurance Reporter, “the words ‘arising from’ carries a sense of consequence”.
The case of Quintano v BW Rose Pty Ltd v Ors (2009) states “the requirement that a claim ‘arise from’ a matter” will be satisfied, if “it originates in, springs from, or has its foundation in, that matter”.
The damage would not have occurred but for the storm, which tore the shrink wrap and caused rainwater to enter the house.
However, the rainwater would not have entered the house, but for the roof removal. Therefore, the case manager believed the necessary “causal connection” between the damage and the roof removal was established.
It is accepted law that, if there are concurrent causes and one is excluded, the claim must fail. The case manager also considered the allegation that the insurer had misled the insured.
It is accepted law in New Zealand that an insurance company must provide a copy of the terms and conditions of the policy to the insured.
There is a duty on an insured person to read and understand the terms and conditions of the policy. An insured is also entitled to ask questions about the cover provided.
The case manager listened to both of the telephone calls and noted the insured was specifically told that any damage resulting from alterations to the roof would be excluded.
The case manager did not believe the increase could have misled him into believing that he had cover for the roof removal, when he had been advised that he did not. The case manager did not believe he was misled into believing that only the construction was excluded and resulting damage would be covered.
The case manager considered a number of other house insurance policies and noted that the roof exclusion was not unusual. The case manager believed the insurer correctly advised the insured about the policy cover and, in doing so, drew his attention to and provided him with the opportunity to read and understand the policy, or make further enquiries if necessary, before undertaking the roof removal.
Therefore, the insurer had established it was entitled to apply the exclusion to the claim.
The complaint was not upheld.
