Suncorp has been ordered to pay an elderly couple for home damage, despite the loss being excluded under their policy, after it mistakenly accepted and later rejected their claim.

The property owners claimed in March last year for internal water damage caused by several heavy rainfall dumps earlier in the year.

A Suncorp-appointed builder noted termite damage in the lounge and home office walls that had occurred “over an extended period”.

And a plumbing expert found at least two unsealed box gutters and defective rain heads that allowed water to enter the property’s bedroom and study.

However, Suncorp’s assessor determined that the homeowners could not have reasonably known about the water ingress and concluded the loss was an insurable event. They approved a scope of works totalling $32,534.  

The insurer accepted the claim and arranged temporary accommodation for the couple.

A few weeks later, Suncorp said it would re-examine its decision after the assessor found more termite damage in the garage.  

It then denied the claim, saying the loss resulted from termite activity and long-term construction defects. It also declined to renew the policy.  

Suncorp later provided further reports from an engineer who indicated the water ingress was due to “systemic design flaws”. 

In a dispute ruling, the Australian Financial Complaints Authority says the insurer’s evidence was persuasive and a storm did not cause the loss.

But Suncorp should honour its initial acceptance of the claim because it had already taken steps to follow through on this, and there were no fair circumstances such as new information to merit reversal.

The insurer was aware of termite damage and provided the engineer’s report only after it changed course and denied the claim.

“The complainants relied on the insurer’s initial claim approval by paying the policy excess of $200, vacating their home (at the insurer’s request to facilitate the repairs) and moving into temporary accommodation, which was arranged and paid for by the insurer,” an AFCA ombudsman said.

“It would not be fair to permit an insurer to simply reverse an unconditional claim acceptance because it later decides the acceptance was a mistake.”

Suncorp must also reinstate its policy renewal offer – which was withdrawn due to the claimed damage not being repaired – and pay $2000 compensation to each complainant for distress caused by its claims handling.

See the ruling here.

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