How to deal with a rejected insurance claim

Few things are as frustrating as receiving a letter from your insurer stating that your claim has been rejected, especially when the damage feels obvious and unfair. This is particularly common in cases involving leaking or corroded pipes, where owners often feel cheated by exclusions in the policy wording.

The scenario

You’ve just received a letter confirming that your insurance claim has been rejected.

As an owner, you submitted a claim due to water ingress. The wall showed signs of damp, the paint was flaking, and a pipe embedded in the wall needed to be replaced.

The insurer assessed the claim and rejected it because the damage occurred over an extended period. The plumber’s report cited corrosion or pitted pipes as the cause, both considered gradual deterioration.

You feel this is unfair. After all, how can you be expected to maintain a pipe that’s hidden inside a wall?

How should you approach this?

Speak to the insurance advisor.

Your first step should be to ask the insurance advisor to explain the reasoning behind the rejection and whether, in their opinion, the insurer acted fairly.

In scenarios like this, if the plumber’s report and accompanying photos clearly show corrosion or wear-and-tear, and the damage was not sudden or accidental, most insurance policies will exclude the damage. A rusty or pitted pipe is often the “smoking gun.”

Your insurance advisor should help you understand this. At Addsure, we go further, providing articles, booklets, videos and web pages that explain these exclusions in more detail. While this may be cold comfort, it helps the owner understand that the advice is supported by literature and precedent, not simply opinion.

If you still disagree: Escalation

If you remain dissatisfied, you may approach the trustees and request that the body corporate submit a formal complaint to the National Financial Ombud Scheme (NFO).

The trustees may refuse if they believe the insurer’s decision is correct. They are not obliged to support the complaint if, in their view, the claim was fairly rejected.

It’s important to understand that, as an individual unit owner, you should not submit a complaint directly to the NFO regarding a claim under the body corporate’s policy. You may be considered a co-insured as an owner, not the contracting party.

In terms of the Sectional Titles Schemes Management Act, the body corporate is the insured, and the trustees are responsible for all related matters.

A formal complaint should therefore be signed by two trustees, or one trustee and the managing agent. Ideally, it should also be supported by a trustee resolution authorising the complaint. (PMR 10).

Interestingly, the NFO website makes provision for both individuals and juristic persons, but not specifically for bodies corporate. In such cases, we recommend submitting the complaint as a juristic person and uploading a formal PDF containing the complaint and supporting documentation, including trustee authorisation.

If a unit owner submits a complaint in their name on the body corporate’s policy, they arguably lack locus standi, meaning they have no legal standing to complain.

Treating Customers Fairly (TCF)

We recommend a balanced approach. Allow the owner to prepare the complaint in their own words, but ensure that the trustees sign it, along with a caveat stating that they support the owner’s right to complain but do not necessarily agree with the content or disagree with the insurer’s decision.

This ensures that even if the complaint is unlikely to succeed, the owner’s right to access recourse is respected, and that the process remains fair and transparent.

The principle of Treating Customers Fairly (TCF), promoted by the FSCA (Financial Sector Conduct Authority), encourages financial services providers to ensure fair treatment for anyone entering into a financial agreement. This includes access to complaint processes and dispute resolution.

Important note

The fact that a pipe is concealed within a wall does not override the general exclusions in most policies. Gradual deterioration, such as long-term leaks or corrosion, is excluded by almost all insurers, regardless of visibility.