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what does the policy booklet say about the exclusion?

When we look into a complaint where the insurer has relied on a policy exclusion to decline a claim, we’ll look at the policy booklet. The booklet is part of the contract of insurance between the consumer and the insurer, so we’ll look to see exactly what it says about what’s covered and what’s excluded. We’ll also check what parts of the policy the exclusion relates to.

Although there are variations in the wording used by different insurers, they tend to say something broadly similar to:

We will not pay for any loss or damage that happens gradually over time.

was the damage caused by an insured event?

The starting point is to decide whether the damage claimed for was caused by an insured event. If it wasn’t, then there is no claim. If it was, then we’ll need to look at whether the damage occurred gradually.

was the damage gradual?

Some damage happens gradually over time, rather than suddenly at a point in time. For example, rot or mould isn’t usually something that suddenly appears. Other damage, like flash flooding or a car knocking over a wall, is likely to be sudden. So we’ll weigh up all the evidence and consider whether we think the damage was most likely caused gradually. In particular, we’ll look at any expert reports and photos of the damage that have been provided.

If we think the damage was caused by an insured event and wasn’t caused gradually, we’re likely to uphold the complaint and ask the insurer to cover the claim.

If we think the damage was caused by an insured event but was caused gradually, then the insurer has a contractual right to decline the claim as long as gradual damage is specifically excluded in the policy booklet. But we won’t automatically say that the insurer treats the consumer fairly by relying on the exclusion to decline the claim. We’ll think carefully about what’s fair and reasonable in all the circumstances and look at whether the consumer could’ve known about the damage.

could the consumer have known about the damage?

Looking at the evidence provided to us, we’ll consider whether the consumer could have been aware (or ought reasonably have been aware) of the damage happening gradually. If we think they could, then we’re unlikely to uphold the complaint.

But if we think the consumer couldn’t reasonably have been aware of the damage happening gradually – and that they made the insurance claim, or took reasonable action, as soon as they could reasonably have known about the problem – we’re likely to say the fair and reasonable outcome is that the insurer should pay the claim.

We think this is fair because the damage has been caused by an insured event, but simply because of the way it was caused, the damage isn’t covered. This is significantly different from a situation where the cause of damage isn’t an insured event – regardless of whether that happened suddenly or gradually.

But it’s important to emphasise that we’ll usually only ask insurers to pay for gradual damage that the consumer couldn’t have known was happening, rather than didn’t know. There’s a big difference between the two.

In the first case the consumer couldn’t know, so they were prevented from noticing the damage and alerting the insurer. They couldn’t reasonably have done any more to prevent the damage so it seems unfair for them to lose out.

But where the consumer could’ve known they had the opportunity to prevent the damage but didn’t do so, it doesn’t seem fair for the insurer to pay when the damage ought to have been prevented.

what about rot?

As well as an exclusion for gradual damage in general, some insurers will also specifically exclude rot. For example:

We will not pay for wet or dry rot.

As rot usually occurs gradually, we think it’s fair – and consistent – to look at a specific rot exclusion in the same way we look at a gradual damage exclusion.











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