Property owner wins leaking pipe vs ground movement dispute

A homeowner whose property suffered severe cracking due to a leaky pipe will be compensated for her losses after winning a claims dispute against her insurer.

The complainant filed a claim with Suncorp on December 17 2021, after noticing the damage across several rooms and external areas around the dwelling following days of heavy rain.

A plumber who inspected the property on January 10 last year detected a leak caused by a burst mains water pipe beneath the house, which they later fixed. The claimant said that this had been the cause of the damage.

The insurer appointed a builder who reported “signs of movement and… cracking in the plasterboard walls,” which they said was caused by ground movement over a long period of time. The builder said the movement caused a poly water supply pipe located beneath a concrete slab to burst.

An insurer-appointed engineer, referred to as EC, also inspected the property. EC said that floor-level surveys showed that parts of the home were elevated at different spectrums due to “seasonal foundation movements”.

EC reported that there had been “insufficient evidence to correlate the events of the rain event and water leak with the house cracks”.

The complainant said this event was the first time her home had been damaged since its construction over 40 years ago. She highlighted that a valuer inspected the property less than a year before the event, in which they acknowledged that the building had been in good condition.

A claimant-appointed engineer, referred to as WAM, provided a report on the damage to the property, in which they backed the valuer’s assessment of the property and rebutted the findings of EC.

WAM said the home and the outside ground had been built in a way that allowed water to flow away from the building. It said this construction was “common practice in areas with highly reactive soil” to provide moisture protection for the material slabs.

WAM noted that EC’s report focused on the condition of the dwelling without investigating the damaged pipe itself and was critical of insurer delays in dealing with the issue.

“The long delay between the initial reporting of the failed pipe and its repair made this problem significantly worse, resulting in a period of at least 25 days for high-pressure water being forced into the subfloor clay at mains pressure,” the engineer said.

The Australian Financial Complaints Authority (AFCA) said that WAM’s evidence had been “compelling,” and that it was not satisfied that the insurer or its inspectors “actually investigated or adequately addressed the likely impact on the property of the high-pressure leak”.

AFCA accepted the cracking had not been present at the time of the valuer’s investigation, which they said would have been evident if the insurer’s assessment had been correct.

It said the findings showed that the cracking appeared near the time of the pipe bursting and had worsened due to the insurer’s delay in repairing.

“I accept the information provided by the parties is conflicting (and I acknowledge their respective rebuttals of the other’s evidence), but I am not satisfied that the insurer has established the exclusion for ground movement applies.

“I consider the extent and severity of the damage will more likely than not have been exacerbated because of the insurer’s delay in attending to the repair of the leaking pipe.

“The insurer had initially told the complainant it would attend to the make safe, but that was then cancelled even though there was clearly an issue. On that basis alone, it is fair that the insurer be liable for the damage.”

The ruling required Suncorp to cover claim-related damage to several rooms of the house as well external areas.

It said the insurer must appoint an independent engineer to outline a full scope of works and either perform repairs or organise a cash settlement based on a builder’s quotes, along with a 20% repair contingency cost.

Suncorp was also required to contribute $5000 to the complainant’s professional fees cost and $2000 for non-financial losses associated with delays in the claims handling.

Click here for the ruling.