Meth damage causing headaches for landlords, brokers

Disputes over property contamination on the rise

Meth damage causing headaches for landlords, brokers


By Gabriel Olano

Insurance disputes over methamphetamine-damaged properties have highlighted the importance for landlords and brokers to continually review their insurance policies’ adequacy, according to a dispute resolution service.

The Financial Services Complaints Limited (FSCL) has seen an increase in complaints regarding methamphetamine damage in properties, with the landlords surprised to find out that they do not have sufficient insurance when making a claim.

“These cases highlight how important clear communication is and that both the policyholder and adviser are on the same page when it comes to understanding what is and isn’t covered and whether or not the level of cover is appropriate,” said FSCL CEO Susan Taylor.

In the most recent complaint, landlord Rawiri was shocked that he was unable to claim $20,000 for damage caused by methamphetamine contamination at one of his three rental properties.

In 2014, Rawiri engaged the services of an insurance broker, who advised him to purchase home insurance policies, with additional landlord’s cover, for each of his properties.

Upon each renewal, Rawiri’s adviser sent him his new policy schedule and policy wording. In 2016, Rawiri asked the adviser if his properties were covered for methamphetamine contamination, as he noticed that this kind of damage was becoming more common in New Zealand.

The adviser said there wasn’t specific cover for damage caused by methamphetamine contamination under his policies, but that this type of damage would be covered by the existing policies.

In 2018, Rawiri’s insurer modified their home insurance product, including introducing specific cover for methamphetamine damage. The following year, the insurer updated the policy terms again and added a new testing level threshold for methamphetamine contamination cover, FSCL said.

That adviser sent Rawiri a document that explained the changes alongside a copy of the new policy wording, but he did not talk to him regarding those changes. In 2020, one of Rawiri’s properties tested for methamphetamine contamination after the tenants moved out. The property had to be decontaminated, repainted and recarpeted.

Rawiri’s claim was rejected, and the adviser told him that the methamphetamine contamination level in the property did not meet the threshold specified in the policy, hence the rejection.

Rawiri accused the adviser of being negligent by recommending a policy with a high methamphetamine contamination level threshold. The adviser denied this, saying that he had sent Rawiri the policy wording which described the details of the methamphetamine cover.

FSCL noted that Rawiri’s broker didn’t speak to Rawiri about the changes to his cover, but he did send him a “summary of changes” document that explained the new methamphetamine testing level requirement.

In resolving the dispute, FSCL concluded the broker should be responsible for covering some, but not all, of Rawiri’s claim for methamphetamine damage.

“For landlords in particular, damage caused by methamphetamine contamination may be something they want to be insured for,” Taylor said. “In New Zealand, there are two sources of information which have different views about what level of contamination creates a health risk – which means that insurers follow one of the two standards. When looking at taking out a policy, it is a good idea for a policyholder to check which contamination standard the insurer uses, so that they are aware of the level of coverage they will have.”

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!