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Insurer wins dispute over claim to fix 40-year-old carport, patio

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A new property owner seeking rectification costs from his insurer for a carport and patio addition made in 1979 has lost a claim dispute.

After the sale settled, a builder visited the property in January last year and found major defects in some structures, including one area where the exterior wall was only single brick and had no piers for additional strength.

“It is suspected, regardless of construction date, this practice was not acceptable at the time of construction,” the builder wrote in a report.

The property owner submitted a claim for the reconstruction of a carport, garage and patio under a Residential Purchaser Title Insurance Policy he held with Stewart Title, a specialist real estate insurer.

He said the structures required demolition and reconstruction, and argued this was covered by his insurance policy because the structures did not comply with applicable building codes at the time they were built.

While approval to erect the structures was issued in 1979, he said the four-decade old building work was never done to code and therefore did not comply.

Stewart Title declined the claim, saying the policy did not cover structural issues and the policy excluded loss from non-compliance with building codes and standards.

The Australian Financial Complaints Authority (AFCA) ruled the insurer was free to decline the claim.

AFCA said that while there was no dispute council approval had been granted in 1979 “the question in this complaint is whether the structures complied with the building approval at that time.”

The only information provided were plans of the structures, which the local council confirmed were consistent with the existing patio and carport structures.

“There is no information showing the construction of the structures did not comply with the approval,” AFCA said.

“Whilst the property buyer says they were likely not built according to relevant codes, there is no information on what codes, if any, were applicable in 1979. The property buyer has not provided any information to show what aspects of the approval were not complied with when originally built.”

AFCA said that meant the property buyer had failed to establish a valid claim and it ruled in favour of the insurer.

“I appreciate the property buyer has suffered a loss as the council required him to remove these structures. However, I do not consider he has provided sufficient information to show these circumstances are covered by the policy,” AFCA’s ombudsman said.

The disputed section of the policy stated it covered instances where “you are forced by a Local Authority to rectify or remove all or part of the existing structures on the Land because any portion of the existing structures does not comply with or was built or modified without obtaining building or development approvals”.

To establish a valid claim, the policy stated the property buyer must show the “local authority had ordered him to rectify/remove existing structures because the structures did not comply with building/development approvals”.

The local council was unable to say whether the original work complied, saying only that “without detailed knowledge of older legislation, the Shire is not able to confirm compliance with legislation at the time of construction”.

After the man’s enquiries on the matter, it issued a building order stating the structures were structurally unsound and he was required to undertake work to remove the structures.

Stewart Title said the cost of this work was not covered by its policy as the enforcement action was not a result of a lack of required building approvals.

The property buyer provided a promotional video from Stewart Title showing a similar circumstance to his own being covered by the policy but AFCA said this was not relevant in assessing whether the property buyer’s loss fell within coverage under the policy.

“Each dispute is considered on its own individual facts and circumstances,” AFCA said.

See the full ruling here.