Foundation repair is expensive. It’s natural to look to your home insurance policy when your Wagga Wagga home develops structural problems. The frustrating reality is that most foundation damage in NSW is not covered, or is only partially covered, under standard home building insurance. Understanding why, and knowing when you do have a valid claim, can save you significant time and money.
The Core Problem: Standard Policies Exclude Gradual Damage
Most standard building insurance policies in Australia (including those sold by the major Australian insurers to Wagga homeowners) cover sudden, accidental damage from insured events, fire, storm, burst pipes, impact, etc. What they systematically exclude is:
- Gradual deterioration: Damage that occurs slowly over time through normal wear and tear
- Pre-existing conditions: Damage that existed before the policy was taken out
- Earth movement (general): Settling, shrinking, expanding, or cracking of the earth
- Reactive soils: Specifically, movement caused by shrink-swell clay behaviour
The last two exclusions are directly relevant to foundation damage in Wagga Wagga. Reactive clay movement, the primary cause of foundation damage across the city, is explicitly excluded in most policies.
Exclusion Language to Look For
Different policies use different wording. Common exclusion clauses for foundation-related damage include:
“We do not cover… settling, shrinking, expansion, or movement of the soil, land, or earth…”
“We do not cover… loss or damage caused by… gradual deterioration, wear and tear, or repetitive stress…”
“We do not cover… loss or damage caused by… earth movement, subsidence, or landslip…”
“We do not cover… pre-existing defects or conditions…”
Read your specific policy’s exclusions section carefully. Do not rely on your memory of what you thought you were buying.
When Foundation Damage CAN Be Covered
Despite the broad exclusions, there are scenarios where foundation damage in NSW is covered:
1. Sudden Pipe Burst
If a pipe within your building bursts suddenly and the resulting water escapes saturate the clay, causing foundation movement, this may be covered under the “escape of liquid” or “water damage” section of your policy. The key is that the damage must result from a sudden, identifiable event, not from a slow leak that has been occurring over months.
What you need: Evidence that the pipe failed suddenly (not gradual deterioration), a plumber’s report documenting the failure, and a foundation assessment linking the pipe failure to the foundation damage.
2. Flood Damage (if flood-covered)
Some NSW policies include flood cover (riverine flooding), either as standard or as an add-on. If your Wagga property was flooded in a Murrumbidgee flood event and the foundation was damaged, flood damage coverage may extend to foundation damage caused by the flood.
Critical distinction: Many policies distinguish between “flood” (riverine, defined water source) and “stormwater” (overland flow, surface water). Ensure your policy covers the type of flooding that actually occurred. North Wagga properties are at the highest risk.
3. Impact Damage
If a vehicle, falling tree, or other impact event damages the foundation structure, this is typically covered under the impact or collision section of the policy.
4. Storm Damage
If a severe storm event (not just ordinary rainfall) causes water to enter areas that would not normally be accessible to water, and foundation damage results, storm damage cover may apply. This is a narrower coverage than it sounds, ordinary rainfall that finds poor drainage is not “storm damage” under most policies.
Documenting a Foundation Insurance Claim
If you believe you have a valid claim, documentation is critical:
Step 1: Lodge the claim promptly. Most policies have notification requirements, you must notify the insurer “as soon as practicable” after discovering the damage. Late notification gives the insurer grounds to reduce or deny the claim.
Step 2: Do not carry out repairs before inspection. The insurer’s assessor needs to inspect the damage in its damaged state. Carrying out repairs before the insurer inspects can complicate or invalidate the claim.
Step 3: Gather evidence:
- Photographs and videos of all damage (dated)
- Plumber’s report if a pipe was involved
- CCTV drain inspection report if drain damage is relevant
- Meteorological data if a storm event is the claimed cause
- Previous building inspection reports (to demonstrate the damage is new)
Step 4: Get an independent structural engineer’s report. An engineer’s report documenting the damage, its cause, and the estimated cost of repair is the most powerful piece of evidence in a foundation insurance claim. This report should specifically address causation, what caused the damage, when it likely occurred, and why it is an insured event.
Step 5: Keep records of all communication with the insurer, dates, names, what was said.
When Your Claim Is Denied: Next Steps
If your claim is denied, you have several options:
1. Request the insurer’s written reasons. You are entitled to a written explanation of why the claim was denied. Read it carefully, understanding the specific basis for denial tells you whether it is disputable.
2. Request an internal review. Under the General Insurance Code of Practice, you can request an internal review of a claim denial. This is handled by a more senior assessor within the insurance company.
3. Lodge a complaint with AFCA. The Australian Financial Complaints Authority (AFCA) is a free, independent dispute resolution service. If you believe your insurer has wrongly denied a claim, lodge a complaint with AFCA. AFCA decisions are binding on insurers.
4. Seek legal advice. For high-value claims, consulting a solicitor who specialises in insurance disputes may be worthwhile. Some solicitors operate on a contingency basis for insurance disputes.
Excess and Underinsurance
Excess: Most building policies have a standard excess of $500 to $1,500. For foundation damage claims, some policies apply a higher “natural disaster” or “earth movement” excess if the event is categorised differently. Check your policy for multiple excess types.
Underinsurance: Many Wagga homeowners carry building insurance set at a sum insured that does not reflect the actual current rebuild cost. This is underinsurance. If you make a claim and the property is underinsured, the insurer may apply “averaging”, paying only a proportionate part of the claim. Review your sum insured regularly, particularly after property values rise.
Practical Cost Table: What Insurance Typically Covers vs Doesn’t
| Scenario | Typical Coverage |
|---|---|
| Reactive clay shrink-swell movement | Not covered |
| Burst pipe damage to foundation | Likely covered (sudden escape of liquid) |
| Flood-related foundation damage (if flood-covered) | Likely covered |
| Gradual drainage failure weakening foundation | Not covered |
| Tree root foundation damage | Not covered |
| Drought-driven settlement | Not covered |
| Storm surge damage in flood (if flood-covered) | Likely covered |
| Construction defect in original foundation | Not covered (not an insured event) |
Frequently Asked Questions
Q: My insurer says foundation damage from clay movement is excluded, but I never knew about this exclusion. Can I dispute it? A: You can request the insurer show you the exclusion clause in the policy document you were given at purchase. If the exclusion was not clearly disclosed, you may have grounds for a complaint to AFCA. However, most standard policies do include earth movement exclusions that are considered adequately disclosed.
Q: I have “total building cover”, surely foundation damage is covered? A: “Total building cover” refers to the sum insured covering the full rebuild value, not to a limitation on what events are covered. The exclusions (including earth movement) still apply.
Q: My insurer sent an assessor who said the damage is from “ground movement”, can I challenge that assessment? A: Yes. An independent structural engineer’s report that specifically identifies the cause as a covered event (such as a burst pipe) provides grounds to dispute an assessor’s conclusion. If you have evidence of a sudden event that caused the damage, commission your own report.
Q: Can I get specific foundation movement insurance? A: Some insurers offer “subsidence” cover as an optional add-on to standard building insurance. This specifically covers earth movement and subsidence, including reactive clay movement. If your home is in a high-risk area (Kooringal, Lake Albert, etc.), this add-on is worth investigating. Premium loadings apply.
Q: How long do I have to make an insurance claim after discovering foundation damage? A: Most policies require notification “as soon as practicable.” In practice, most insurers will consider claims lodged within 30 days of discovery. Claims lodged years after discovery are very difficult to succeed with. Act promptly.
Need a foundation inspection report to support an insurance claim in Wagga Wagga? Contact Wagga Foundation Repair, we produce thorough inspection reports that document cause and extent of damage for insurance purposes.