Landlords, brokers warned to be clear on meth cover

New Zealand’s Financial Services Complaints Limited (FSCL) advises landlords and insurance brokers to ensure that policies cover all risks appropriately, as complaints about methamphetamine damage rise.

The FSCL has noted a rise in complaints from property owners after finding out their insurance does not cover methamphetamine contamination.

In recent years, insurers have introduced caps and exclusions to their home insurance policies for methamphetamine-related damage.

The FSCL highlighted a recent dispute ruling where a landlord was shocked to find he could not claim $NZ20,000 ($18,123) repair costs after one of his rental properties was contaminated with methamphetamine.

The man held a home insurance policy with additional landlord cover advised by his insurance broker.

In 2016, the complainant asked his adviser if his property was covered for methamphetamine contamination, noting an increase in incidents.

His broker said the policy held no specific coverage relating to methamphetamine damage but that his policy would cover the event.

Throughout 2018 and 2019, the landlord’s insurer updated the policy, including changes towards methamphetamine damage cover and guidelines for contamination testing.

The claimant’s broker alerted him to the changes but did not specifically highlight the methamphetamine policy changes he had previously inquired about.

In 2020, after tenants moved out of one of his properties, he conducted testing that found parts of the house were methamphetamine-contaminated.

The complainant asked his insurer to cover the costs of the testing and decontamination work but was denied because the contamination levels did not meet the required threshold to be covered.

He believed that his adviser acted negligently by recommending him a policy with a high requirement to be covered for methamphetamine contamination. The broker said he informed the landlord of the conditions and provided him with a document detailing the changes made in 2019.

An FSCL determination required the broker to pay for parts of the damage, saying that he did not directly address the landlord’s concerns regarding methamphetamine contamination and only referred him to a document summarising policy changes.

“These cases highlight how important clear communication is and that both the policy holder 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,” FSCL CEO Susan Taylor said.

Ms Taylor advised proprietors to remain aware of differences in individual insurer policies and seek expert advice if unsure.

“For landlords in particular, damage caused by methamphetamine contamination may be something they want to be insured for. 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,” Ms Taylor said.

“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.”