Home insurance claim rejected for wear and tear. Is that fair?

Laura du Preez | 21 December 2021

Laura du Preez has been writing about personal finance topics for more than 20 years, including eight years as personal finance editor for two leading media houses. 

As a homeowner who has building insurance, you expect to be able to claim after a storm rips off a piece of the roof and lets the rain in. Or causes a boundary wall to fall down.

If the roof or the wall was in good order, then you would be right. However, you should not expect an insurer to pay when the roof or the wall was in disrepair before the storm, even if the storm was the last straw that took the roof off or the wall down.

This was confirmed by the Ombudsman for Short Term Insurance (OSTI) in a recent decision on a complaint.

The ombudsman’s decision on the complaint also highlights that if you finance your home on loan and use the same bank to insure the property, you should not expect the bank to point out the property’s defects.

The bank inspects your property to ensure that if you fail to make your repayments, that it can recover its loan.

As the purchaser of a property, it is your responsibility to satisfy yourself that the property is of sound construction, well-maintained and free from defects, the ombudsman says about the complaint in a recent OSTI Briefcase newsletter.


How the claim arose

Within two months of buying a house, the roof leaked during a heavy storm and damaged the inside of the house, according to the OSTI Briefcase.

The homeowner claimed for the damage, but the insurer rejected the claim for the repairs to the roof.

The insurer’s assessor found the asbestos roof had wear and tear - the roof screw seals had deteriorated, the waterproofing was perishing and the facia was cracking due to old age, the newsletter says.

The policy specifically excluded losses or damage as a result of wear and tear or breakdown that was not sudden or unforeseen. Loss or damage as a result of a lack of maintenance and defective workmanship or materials was also excluded.

The homeowner was unhappy and appointed an engineer to assess the roof.

The engineer found the roof trusses and purlins had not been installed in line with municipal bylaws, the wood used was substandard and the incorrect repairs had been done.

The homeowner said he had asked the insurer to inspect the property before he moved in and the insurer should not have insured him before it had inspected the property.

The ombudsman found the that the engineer’s report stated clearly that the whole roof needed to be replaced and fundamental defects that were not related to the storm damage, but had existed before the property was insured.

The ombudsman pointed out that:

  • The insurer provides cover only for damage going forward from the time you insure the property and not before;
  • An insurance policy is not a maintenance contract;
  • Cover is for sudden, unforeseen, or fortuitous events.

The ombudsman noted that the homeowner felt he was an innocent victim of circumstances, but the insurer had no obligation to inspect the property.

The owner clearly did not know of the condition of the roof when he bought the property and should have taken up the defects with the seller rather than with the insurer, the ombudsman said.

The ombudsman also pointed out that the insurer and the bank were two separate and independent legal entities and that they must not be confused or conflated.

The ombudsman therefore upheld the insurer’s decision to reject the portion of the claim for the roof damage.


Common exclusion

Exclusions for damage arising mostly from wear and tear are common on homeowner’s insurance, Lizo Mnguni, pricing manager at Old Mutual Insure, says.

These clauses prevent anti-selection – so you cannot take out insurance when you know your roof is in a state of disrepair, hoping your insurer will repair what you should have maintained.

Mnguni says underlying all insurance policies is a duty of care to maintain the home or car, or any other assets you have insured.

There can be a fine line between wear and tear and an insured event, but an assessor will ascertain the primary cause of the damage. If it was due to a gradual deterioration that you should have noticed during a regular inspection of your property, your claim may be denied, he says.

Mnguni says you can avoid nasty surprises when you claim by regularly inspecting your property. Before you buy a property, get a professional who is familiar with all the building regulations, to inspect it, he adds.

That professional should tell you what is defective or in need of repair.

Mnguni recommends using builders registered with the National Home Builders Registration Council (NHBRC) - even for the construction or repair of boundary walls – as the NHBRC can ensure you are compensated for defective work by builders registered with the council.

He also suggests you scrutinise any contract you enter into with a builder, talk to people who have used that builder before and never pay in advance for work.

Burst geysers and water pipes are typically not subject to the wear and tear exclusion – most insurers cover these events.

If your property is an older one with a higher risk of burst pipes, this will be reflected in your premiums, he says.


Another ombud weighs in

In its latest annual report, the Ombud for Financial Services Providers (FAIS Ombud) says over the years there have been a number of complaints about storm-related claims on homeowner’s insurance that have been rejected.

It says complaints about damage caused by acts of nature have made up 54% to 61% of complaints about homeowner’s insurance over the past three years and the primary cause of complaints - between 30% and 48% - was a rejection of the claim based on wear and tear, gradual deterioration and lack of building maintenance.

The FAIS Ombud, who can order that you be compensated if you get bad advice, typically refers these complaints to the Ombudsman for Short-term Insurance.

However, the ombud’s office says it is concerned that there do not appear to be any improvements made in the manner in which these policies are sold to the public.

The ombud says it is clear from these numbers that consumers do not always know or understand the material terms and conditions contained in their policy documents, and home loan providers are making no effort to inform consumers.

When you take out a home loan, many consumers also take insurance for their home from the same provider. The application forms are signed in a lawyer’s office and there is no financial adviser in sight, the ombud says.

Mnguni says you should always be encouraged to check the terms of your policy but some institutions do not do enough to educate consumers.

The ombud warned that when homeowners complain it will consider the advice given and refer providers who are not making an effort to provide proper advice to the Financial Sector Conduct Authority.

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