Hidden Gradual Damage Insurance Claim Overturned – Independent Insurance Assessment Case Study

When water damage strikes, insurance companies often classify it as “hidden gradual damage”. Policies usually limit these claims to between $1500 - $3,000, less any excess. But what happens when the damage clearly stems from a sudden event, and the insurer misclassifies it?

This case study shows how an independent insurance assessor in NZ helped a homeowner challenge their insurer’s decision, secure a fairer outcome, and reveal just how costly mis-assessments can be.

The Background

Our client discovered a pinhole leak in a concealed pipe that had only recently become visible. Within days, there were signs of swelling to the wall linings and staining. The claim was lodged with the insurer immediately.

The insurer appointed an internal Loss Adjuster (LA) and engaged Their own contract Assessor(builder) to inspect. The builder’s report indicated the damage was consistent with a sudden water event. However, when the LA reviewed it, the insurer classified the claim as Hidden Gradual Damage (HGD) — limiting settlement to just $2,250 after excess.

Key Findings from Our Review

🔎 Upon independent reassessment, we found:

• Sudden event, not gradual
  The source was a pinhole leak that had only recently become visible. Saturation patterns and timber swelling aligned with recent water ingress, not long-term deterioration.

• Black mould ≠ long-term decay
  The insurer claimed there were “beginnings of rot.” In reality, the timber showed saturation and black discolouration — a normal microbial response when timber is wet, even if treated. Rot was not present.

• Fungal growth occurred after lodgement
  The insured later observed fungal growth at the skirting, but this developed after the claim had already been lodged — highlighting that damage worsened due to insurer delays, not long-term neglect.

• Contradictory assessments
  The assessor(builders) report pointed to sudden damage, yet the LA’s report contradicted this, without clear evidence. This misinterpretation left the homeowner in a vulnerable position.

• Scope of works underestimated
  The original scope ignored key areas — adjoining kitchen cabinetry, hallway flooring, downstairs wardrobe ceiling, and even overlay flooring extending into dining and lounge spaces. No proper drying, decontamination, or restoration plan was actioned.

The True Cost of Repairs

We prepared a comprehensive independent scope of works, factoring in:

• Replacement of affected wall linings, cabinetry, flooring, and skirtings

• Proper drying and decontamination

• Reinstatement of tiling and splashbacks

• Temporary accommodation for the family during works

Our estimate: $47,188 incl. GST, far exceeding the insurer’s initial $2,250 cash settlement.

Why This Matters

Insurance policies often refer to “gradual damage,” but rarely define the timeframe. Many assume that mould or staining always = long-term damage. In reality, mould can develop in as little as 48 hours, and timber saturation can cause visible staining within days.

This lack of clarity leaves homeowners at a disadvantage when insurers apply restrictive interpretations. That’s where independent insurance assessors step in — to provide a technical, science-based assessment of what actually happened.

Outcome

Following our involvement, the insurer acknowledged errors in handling and even reimbursed the insured’s fees for engaging us. This demonstrates that independent reviews not only support fair settlements, but also hold insurers accountable.

Takeaway

If your claim has been:

• Denied as gradual damage,

• Limited under Hidden Gradual Damage provisions, or

• Settled with an inadequate scope of works…

… it’s worth seeking an independent reassessment.

Getting a second opinion can uncover hidden costs, challenge vague insurer definitions, and ultimately protect your home and finances.

👉 Need help with your own claim?

At The Assessing Co, we provide independent, no-nonsense insurance assessments across NZ. Whether it’s gradual damage, water leaks, smoke damage, or denied claims, we’re here to ensure you get the settlement you deserve.