Standard cover

The 60-day rule that empties your water cover

There is a provision in the Insurance Contracts Regulations 2017 that removes most of your water cover, that almost nobody has read, and that is shorter than this paragraph.

It is reg 19(2)(f), and what it excludes is:

if the home building is unoccupied and has been unoccupied for a continuous period of more than 60 days — destruction or damage occurring otherwise than as mentioned in subparagraph (1)(a)(ii) or (iii) or (vii) to (xiv), or the incurring of liability as mentioned in paragraph (1)(d)

That reads like nothing until you go and look up which subparagraphs it kept.

What survives, and what does not

Reg 19(1)(a) lists fourteen events. Reg 19(2)(f) keeps (ii), (iii), and (vii) through (xiv). Everything else goes.

Still covered after 60 days: lightning or thunderbolt, earthquake, riot or civil commotion, malicious acts, vehicle impact, space debris, animal impact, falling trees, aerial collapse, and the storm–tempest–flood–sea–tsunami–erosion–landslide–subsidence group.

Not covered after 60 days: fire or explosion. Theft and burglary. Deliberate or intentional acts. And — the one that matters here — subparagraph (vi): the bursting, leaking, discharging or overflowing of fixed apparatus, fixed tanks or fixed pipes.

The single most common cause of domestic water damage in Australia drops out of standard cover after two months of vacancy.

Sixty days is not very long

This is the part that catches people, because the situations that produce a 60-day vacancy do not feel like leaving a house empty.

• A deceased estate. Probate routinely takes longer than two months. The house sits, the water is on, and a flexible hose behind a toilet has nothing to do but wait.
• A renovation. Everybody moved out in March, the kitchen is coming out in June. Nobody is living there and nobody thought of it as unoccupied.
• An investment property between tenants. A vacancy that is ordinary from a letting perspective and fatal from an insurance one.
• A holiday house. The obvious case, and the one insurers explicitly price for — which is why holiday-home policies exist as a separate product.
• An extended trip. Three months overseas is three months of vacancy.

Note the word continuous. Somebody going in once a fortnight to collect the mail is a question of fact about occupancy, and it is not a question you want decided after the ceiling comes down.

What to do about it

Three things, in order of how much they cost.

Tell the insurer, in advance. This is free and it is the whole answer. Most insurers have an unoccupancy provision, a form, or a specific product, and the conversation takes ten minutes. The one thing that does not work is telling them afterwards.

Turn the water off at the meter. Also free. A property with no water pressure cannot produce an escape of water, and a mains tap turned off is the cheapest insurance policy available to anyone leaving a house empty. It is not a substitute for telling the insurer, because a storm will still get in — but it removes the exposure this particular provision creates.

Check whether your policy varies it. Reg 19 sets standard cover, which is a floor. An insurer may sell a policy that covers less, provided it clearly informed you in writing that it was doing so, and it may also sell one that covers more. Some policies extend the period; some shorten the practical effect by adding conditions. The schedule is the document that says which.

Why it exists

Not as a trap. The reason is actuarial and it is reasonable: an escape of water in an occupied house is discovered in minutes and an escape of water in an empty house is discovered when somebody eventually visits. The same failure produces a claim of a completely different size, and reg 19(2)(f) is the line the regulations drew around that.

Which is also the practical reading. The risk the provision is aimed at is duration. If you can reduce the duration — a neighbour with a key, a water leak sensor, a mains tap turned off — you have addressed the thing the provision exists for, whether or not you have addressed the provision.

If it has already happened

If a claim has been declined on this basis, three things are worth establishing before you accept it.

Was it actually continuous, and was it actually more than 60 days? These are questions of fact and the burden of establishing an exclusion sits with the insurer. Dates matter.

Which subparagraph does the insurer say applies to your loss? If the water came in through a storm-damaged roof, that is subparagraph (xiv) and reg 19(2)(f) does not reach it at all.

Ask for the reports. Paragraph 82 of the General Insurance Code of Practice requires the insurer to give you the information and the external expert reports it relied on, within 10 business days of your asking. In a vacancy decline, the file usually contains somebody’s assessment of when the property was last occupied, and that assessment is frequently based on less than you would expect.

Then, if it does not resolve, AFCA — which is free, which the Code obliges general insurers to belong to, and whose determinations bind the insurer.

The covered and not covered page has this as one row among eighteen. It deserved its own.

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