Insured. Until it rains

Johnny is no cowboy, mind you. His favourite movie is Johnny English. He has a dry sense of humour, a penchant for wine gums and prefers plain english. And he does things by the book. Before he signs anything, he gets an independent building inspector in. Then the compliance certificates, electrical, plumbing, beetle. Alles, the whole 9 yards. Everything comes back clean. Including the thumbs up from his brother in law who has a significant nose, including for dodgy buildings. And there you have it, a pre owned house, in a good area, with a clean bill of health from three sources. That is like finding parking at the Waterfront in December. Lekka.

Then he phones to put the building on his policy. What is the sum insured they ask? Where is it? Standard construction? Ja, all good, congratulations, you are covered meneer. Have yourself a nice day.

Johnny finds it odd that no one at Sharp Sharp Insurance asks more questions. Not even about the inspection. Why would they? They will get their own look at the house soon enough. After the rain.

And as luck would have it, four months later a proper storm hits Kaapstad, the kind where the neighbourhood WhatsApp group pings non stop with photos of trees in strange positions and missing roofs. A serious amount of water finds its way into Johnny's house. Ceilings, floors. The whole caboodle, kaput from water damage.

So Johnny claims. This is why he pays premium without fail. And on time, always keeping his end of the bargain.

The assessor pitches up, pokes about while humming and chewing wine gums (compliments of Johnny) at the same time. A few days later the dreaded email arrives. Claim declined. The waterproofing had deteriorated they say and the policy excludes damage caused by wear and tear and gradual deterioration.

Eish.

Johnny's first question is the one every normal Saffer would ask. How was I supposed to know? I did nothing wrong he mutters. The only crystal ball he had ever seen was the one spinning at a discotheque in the 1980s.

He knows waterproofing the way I know ballet. For Johnny, the deterioration was neatly tucked away where a normal person with a demanding cat and day job would never spot it. Even the independent inspector found no warning signs. The previous owner did not disclose it, as they too were blissfully unaware. The insurer never came round to see what they were insuring before the storm. The first person in the whole story to spot it was the insurance assessor, who had a big clue. A massive water damage claim. This intrepid assessor, who is sometimes unfairly portrayed as the villain, finds himself standing ankle deep in water in Johnny's lounge. Now a kiddies swimming pool. No moisture meter required.

Hindsight is 20/20, as they say. In insurance it comes with a clipboard. And this is when Johnny’s blood pressure becomes another uninsured problem. Johnny can take every reasonable precaution and still have his claim denied. The exclusion is about what caused the damage, not whether Johnny was a responsible homeowner. Full marks for doing everything right, Johnny. Do not pass Go. And do not collect R200.

This is what gets people, possibly more than the unpaid claims. The email reads like Johnny should have seen it coming. But our Johnny is no clairvoyant or reckless property owner.

And he is not alone. In the ombud's latest numbers, homeowners insurance made up close to 30% of non life insurance complaints, storms and other acts of nature (sometimes called acts of god) were just 40% of those and the biggest culprit was claims rejected for gradual deterioration, lack of maintenance or wear and tear.

Johnny pops another wine gum and scratches his head. He can understand why the waterproofing itself is not covered, but surely they will pay for the ceiling and all the hidden resultant damage. As Johnny sees it, the storm caused the damage. And storms are covered.

Surely is more like maybe. It depends on the policy fine print. The stuff most Saffers dislike about insurance. Policies generally exclude the worn thing itself, in this example the waterproofing, but then may add a line saying they will still pay for the unforeseen damage that results from it. In the risk business we call that resultant or ensuing damage. With that line, Johnny pays for new waterproofing and the insurer may pay for the ceilings and floors.

But, plenty of policies, including Johnny’s, do not have that wording. They say no cover for damage “caused by” wear and tear and leave it there. Caused by. Two small words and the ceiling and floors get the same treatment as the waterproofing. And the kicker is having ensuing or resulting damage cover does not necessarily save Johnny either. If that cover remains subject to the wear and tear exclusion, the insurer can still say the failed waterproofing means the resultant damage to the ceilings and floors is not covered too. Klaargelag, as they say in Afrikaans.

Now try and explain this insurance idiosyncrasy to Johnny. Say Johnny has another claim for an old pipe hidden behind a wall that bursts. Some policies in the Republic will say the deteriorated pipe is not covered, but the resulting water damage is. The logic is that a burst pipe is an insured event. Yet when deteriorated waterproofing hidden under the roof lets stormwater in, the ceilings and floors are his problem too. Johnny is now totally confused, he read that storm was an insured event. Same Johnny. Same lack of superpowers to see through walls or roofs. Both worn. Both hidden. Both leave his lounge looking like a swimming pool. Johnny is unhappy. Johnny would like an explanation in plain English please.

To be clear, I am with insurers on not paying for the worn part. Insurance was never intended to pay for inevitable damage as property gets old and depreciates. A motor that smokes after years of use, with no preventative maintenance was always going to give up the ghost. If maintenance damage to every old roof was covered, the premiums would be unaffordable. Clarity on how and when resultant damage is covered, however, is where we differ.

Which brings me to an ombud ruling about a roof rejection that still sticks in my throat like a dry chop. A homeowner, sagely and reasonably in my book, argued that his insurer should have inspected the roof before covering it. The ombud said aikona. The insurer had no legal or other obligation to inspect the property before providing the cover and backed the insurer’s rejection of the roof claim. Joe Public is left swallowing the bill and using language unsuitable for the neighbourhood WhatsApp group. The playing fields seem uneven. On the face of it, it is all too easy for insurers, at claim time, to say “you should have known” about risks only Superman could see.

Some smart person asked underneath that ombud ruling, if a motor vehicle is usually inspected before the insurer gives cover, why not all forms of cover? Twenty years plus in this game and I do not have an answer to this. Other than the obvious, resources and costs. I do find it surprising that no insurer has found a solution. The sheer volume of dissatisfied clients should be reason enough.

Also, insurers pay for every one of these disputes, in time and in reputation. They live in hope that clients will maintain their homes to the insurer’s standard, hidden risks included and keep a maintenance file. A very long shot. And for this privilege, they pay fees, since the ombud is funded by a case fee charged for each complaint registered against a member insurer.

Clients are out of pocket and lose their faith in insurance. Insurance remains a grudge purchase and a popular topic at the braai for all the wrong reasons.

I have stopped holding my breath on wear and tear rejections, as insurers seem intent on not changing the mechanics of a complex and misunderstood product that works for them and is supported by the ombud.

A standoff. Saffer style. The entire party at the braai with their arms folded, frowning, waiting for someone else to go and fetch the ice. Or beer and Lays chips if the Boks are playing.

This got me thinking, even though no one at the braai asked me to.

Some proper insurers cover resultant damage from hidden roof leaks. But when does wear and tear take that cover away? Why not make it clear before the rain? My proposal is that Johnny pays for the worn bit and the insurer pays for sudden damage from deterioration no one could reasonably have seen. He should not need a rejected claim and a no from the ombud to find out what he bought.

What if an insurer offered this as an optional extension at an additional premium? Johnny sends insurers a pre acceptance building report from an approved, independent inspector. Colour photos and all. Maybe even a high tec video. The insurer gets time to study it and ask questions, with the option to send its own person to have a look if it wants should anything seem suspect. If happy, they endorse the policy for the next 12 months, so that concealed wear and tear or gradual deterioration will not, on their own, disqualify sudden resultant damage.

Johnny still pays for the worn bit. If the waterproofing conks in, the new waterproofing is on Johnny. The insurer pays for the ceilings and floors and the resultant damage. Some sudden insured event still has to happen, like a storm. A wall that has been damp since the Boks 2019 World Cup triumph is still Johnny's problem.

All that is needed is simple promise in the policy wording clarifying the cover. Something like, we cover sudden physical damage to other parts of the building caused by concealed deterioration that you neither knew about nor could reasonably have discovered. We do not cover repairing or replacing the deteriorated component itself.

This would not mean the client can pause reasonable and obvious building maintenance. Johnny would need to disclose any changes to the building like alterations or repairs. And let the gutters fill up with leaves in month nine and the insurer can still say Johnny did not take reasonable care and that would be fair enough. This is cover for sudden resultant damage from hidden risks, not a maintenance policy or plan. At renewal, a new inspection report is required.

Will most people bother? Probably not. Will every insurer offer it? Also probably not. Some scallywags with known defects will doubtless try their luck. That is what the report and the insurer’s option to investigate are for. Accept the risk, price it properly or politely decline the optional extension.

I am not suggesting for a moment that this endorsement will make every wear and tear dispute magically disappear. There will always be someone who regards asset maintenance as an optional extra. But it could give the prudent Johnnys a fairer deal. People who look after their homes and pay for inspections would much rather avoid a claim altogether. And it may keep insurers out of the consumer complaint columns.

Until some forward thinking insurer innovates, phone your insurer or risk advisor and ask, if my claim gets turned down for wear and tear, does my building policy still pay for the resultant damage if I can prove I took reasonable care to avoid the loss? If they have to go and check, that is fine. If the answer is no, ask what alternatives are available. If they do not know where to check, that is a more troubling conversation. Also, good luck in getting a conclusive answer; expect something like, “each building claim is judged on its own merits”. Bah humbug.

So, which insurer will blink first? If any. Whoever does gets to wear the client satisfaction trousers, at least until the rest of the market catches on.

Johnny, for the record, would have paid for the extension. He had already paid for the inspection, the certificates and a packet of wine gums for the assessor, which in hindsight he wants back. He is not asking insurers to fix his waterproofing. He would just like someone to tell him, before the next storm, whether the ceiling is his problem or theirs. In plain english please. Many thanks and have yourself a nice day.

Disclaimer:

This article is provided for general information only and does not constitute insurance, financial or legal advice. Where relevant, it draws on publicly reported information. The scenario is fictional and is used to illustrate real insurance principles and common industry practices. It does not refer to any specific insurer, policyholder or claim.