Homebuyers Lose Dispute After Inspection Misses Hail Damage

New homeowners recently lost a claim dispute in which a pre-purchase inspection failed to highlight pitting all over their roof as a result of tennis-ball sized hailstones that battered the region six months prior. 

Before closing the purchase, the buyers brought in an approved builder who inspected the roof and only identified “heavy surface rust due to metal reaction, zinc roof sheeting and iron valley gutters” on their roof.

The potential buyers went ahead with the deal and purchased the house before taking out a home and contents cover with Commonwealth Insurance which was founded on November 4, 2020.

The new homebuyers then hired a tradesperson to fix issues highlighted in the builder’s inspection report. On December 13, 2020 the tradesperson noticed hailstone indentation marks and notified the homebuyers who then filed a claim for damage to the roofs atop their main house, patio, granny flat and carport, in addition to damage to kitchen walls and bedroom ceiling.

Ideally, the new homeowners’ mishaps began when they failed to carry due diligence of the builder they wanted to engage for their roof inspection.

According to the Commonwealth Insurance specialist, the damage was caused by a powerful hailstorm accompanied with tennis ball-sized hailstones that occurred in April 2020.

On the other hand, their roofing expert noted visible pitting across the entire house roof, indicative of impact by hailstones while the pergola, carport and rear granny flat also got minor dents on their roof sheeting.

The Commonwealth Insurance declined the claim; a decision that compelled the homeowners to escalate their complaint to the Australian Financial Complaints Authority (AFCA), arguing that the damage happened after the insurance policy came into effect as it was not captured in the pre-purchase inspection report.

The homeowners added that there were several storms that occurred after they had purchase the property, and that these could have caused the dents.

Commonwealth Insurance explained that the only heavy storms capable of causing such magnitude of damage were recorded in April and October, way before the policy came into effect. However, the policyholders insisted that the insurance company had not indicated that the two natural events had caused the damage.

In their ruling, the AFCA determined that the homebuyers had not brought a valid claim as it lacked information from the Bureau of Meteorology confirming that a hailstorm event of adequate magnitude took place during the insurance period.

“It is more probable than not that it occurred before the policy commenced,” AFCA said. “Identifying pre-existing hail damage after the house purchase is not a matter for the insurer.

“I do not consider that it was reasonable for the complainants to expect the insurer to pay the claim without them providing any information to show that there was a hailstorm after the date the policy started.”

A closer look and comparison of photos included in the pre-purchase inspection report and after the policy commenced showed similar roof condition and damage. The AFCA added that the policyholders failed to establish that after taking the policy a hailstorm occurred that had the strength to cause that kind of damage on the roof.

“It is not enough for the complainants to say that there was no hail damage noted on the report they commissioned on November 4. The absence of the hail damage in the earlier report does not overcome the absence of information about a hailstorm after the start of the policy.”

AFCA added that an initial letter from the insurance was unclear and that the policyholders “could have suffered interference to their peace of mind”, observing that Commonwealth Insurance had rejected the claim despite its roofing expert advising them to accept it.

In conclusion, the AFCA said it found no basis to have the policyholders compensated by the insurer.  “The insurer’s decline letter was confusing to understand,” AFCA said. “The insurer could have drafted a decline letter that was easier to read and more relevant to the circumstances. However, this does not mean that the insurer should pay compensation.”

See the full ruling here.