The perfect storm

Carlos bought a beachside house with monolithic cladding. Before he bought the house, Carlos’s bank reviewed the vendor’s builders report to ensure it was not a “leaky” home. Satisfied with the report, the bank approved Carlos’s mortgage.

 

Two months later Carlos’s town was hit by a cyclone. After the cyclone, Carlos noticed a leak in his downstairs bedroom and the ceiling starting to droop. Carlos called a builder to repair the leak. The builder filled up the upstairs balcony with water and found three leaks that had seeped into the bedroom ceiling. In his opinion, the cladding by the balcony had been damaged due to the storm and this had allowed water to come inside the house.

 

Carlos claimed the costs of damage cost arising from the cyclone from his insurer.

 

When the insurer arrived, they found black mould visible on the timber frames and concluded the leak had been happening for a long period of time. The insurer declined Carlos’s claim. In the insurer’s view, the leak had occurred due to wear and tear and not because of an unforeseen event. Carlos did not have cover for wear and tear in his insurance policy.

 

The insurer also appointed an independent building surveyor to assess the damage. The report found many weathertightness issues with the house, including the roof and deck failing to meet the required building standards of the time. The report noted that monolithic cladding is inherently high-risk especially for a house that is complex and in a high exposure zone (like Carlos’s), and the damage in Carlos’s house was likely to be widespread.

 

Dispute

The insurer declined Carlos’s claim because his insurance policy specifically excluded damage caused by his home failing to meet New Zealand building standards for weathertightness.  

 

Carlos felt this was unfair. He was adamant there were no weathertightness issues until the cyclone damaged his house. Carlos relied on the vendor’s builder’s report which showed no concerns with the building construction or its weathertightness – otherwise, he would not have bought the house. Carlos also argued that his bank would not have approved a mortgage for a leaky home.

 

Carlos complained to FSCL.

 

Review

We reviewed all of the evidence that both parties provided and found substantial conflicts in the expert evidence.

 

It appeared that no concerns with the maintenance or weather tightness of the house were apparent or picked up before the storm. These issues only became apparent when the storm, with particularly directed strong winds, drove rain-water into the house, exposing the house’s defects to Carlos for the first time.

 

We considered that on the evidence available, two scenarios were possible. Either, the cyclone was able to drive a large amount of water into the house because of defects in the house’s construction, or, the cyclone damaged the balcony, and the house’s defective construction created the perfect conditions for water damage. 

 

Outcome

We decided that the damage was likely due to a contribution of both an unforeseen event (the cyclone) and construction defects. We asked the insurer to pay Carlos for half the repairs minus any excess.

 

The insurer agreed and the claim was settled.

 

Insights for the consumer

Consumers should always get their own builder’s report before purchasing a house. A vendor’s report may not be as thorough, or applicable in purpose.

 

Consumers should be aware that monolithic cladded houses are considered inherently high-risk from a weathertightness perspective. It pays to check whether your insurer will cover losses arising from water entering the house.

 

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