Allianz had any and all mould arising from the insured incident remediated and appointed builders to carry out repairs to the property (largely confined to replacement of a large section of parquetry flooring) thereafter in accordance with the scope of works. Repairs commenced in February 2015 but ceased in June 2015 after Briese raised concerns regarding the scope and alleged quality of works being performed. Briese ultimately refused the builder ongoing access by changing the locks to the premises. She would go on to allege that the property had been severely affected by mould, alleging this was caused by the insured event and/or Allianz's failure to complete the works.
Allianz in fact went to extraordinary lengths to attempt to address the issues raised by Briese, appointing a number of experts including structural engineers, hygienists, quantity surveyors and building assessors to inspect and report on the property and the costs of repairs. These experts confirmed that the original scope of works was the correct scope to rectify the insured damage.
Briese alleged that Allianz breached the contract of insurance in failing and/or refusing to fulfil the repair obligation arguing that she was justified in stopping the works being undertaken. Further she claimed that she was justified in retaining the services of her own builder, Longbow Group, to repair the home in an attempt to 'mitigate her loss'. Briese obtained a quote from Longbow Group in the sum of $1,574,634.60 which was the amount that Briese ultimately paid Longbow Group and sought from Allianz by way of damages. This was some $1.45 million more than the Allianz costing of the repairable damage caused by the insured event.
Allianz denied that it breached the policy or that it had any remaining obligation to Briese as a result of the burst event. Allianz maintained that it was seeking to repair the damage to the house as a result of the insured event but that its endeavours to do so were frustrated by the conduct of Briese. Allianz further alleged that the actions of Briese contributed to the extent of the damage sustained to the property and that such losses were therefore her responsibility and did not constitute losses arising as a result of a breach of contract by Allianz.
His Honour commented that the actions of Allianz "could not be faulted" and that it was Allianz who was ready willing and able to complete the works to the property caused by the insured event. His Honour found that 'in circumstances where both parties had not elected to terminate the contract, it was the plaintiff who had by her conduct evidenced a refusal to permit [Allianz] to discharge its contractual performance, namely repair the damage, and therefore it was the plaintiff who breached the contract'.
Allianz's experts gave evidence that a substantial amount of the observed damage to the premises of Briese was unrelated to the insured event in that it was either the result of structural defects, was pre-existing damage, was the result of other causes of water ingress likely due to failed maintenance and/or was caused or contributed to by the plaintiff's delays. In relation to the dispute as to the appropriate scope of works and extent of the insured damage, in particular the mould damage, his Honour accepted and preferred the expert evidence provided by Allianz's experts and found that the original scope of works identified by Allianz was the correct scope to rectify the damage caused by the insured event.
His Honour also found that Allianz had taken all reasonable steps to remediate the mould caused as a direct result of the insured event by the time of repairs and June 2015 (being the time at which time Briese refused Allianz's contractors any further ongoing access to the premises) and held that the her conduct in leaving the property locked and unoccupied coupled with her failure to address the issues of ongoing moisture and ventilation ultimately resulted in further damage occurring as a result of mould developing in the property. In making this finding, his Honour commented that 'what emerged from evidence and as a matter of common experience, mould is ubiquitous and all property owners have a present continuous duty to take precautions to avoid its development. Those obligations remained on the plaintiff at all times and explain why mould was an excluded condition under the policy.'
In addressing the pleadings and expert evidence put by both parties, His Honour commented that 'the defence by Allianz was comprehensive and confronted the plaintiff with what it asserted were the consequences of her actions. The defendant did not focus solely on challenging the plaintiff's actions as being unreasonable. Rather effectively the defendant alleged that the plaintiff was the contract breaker by preventing its performance of its duties under the contract.'
The case points to the significance of a breach of the duty to cooperate and that Courts are willing to find that an insured's breach of the duty to cooperate relieves the insurer of its obligations under the policy where the insurer has elected to repair but has been frustrated in its attempts to repair.
The decision also affirms the position that the onus is on the plaintiff insured to prove that they have suffered damage and that it is only in the event that the insurer is found to have breached the contract of insurance that the plaintiff is entitled to such damages.
This case serves as a reminder for insurers of the importance of obtaining well formulated expert evidence when assessing a claim of this nature and as a reminder for insureds of their obligation under the policy to cooperate with the insurer as well as the obligation to act in good faith pursuant to the Insurance Contracts Act 1984.