Subsidence or Settlement and Why it Matters

Since we are celebrating all things environmental this month, it seems only fitting that we discuss the topic of ground movement and its implications for your short-term insurance. Ground movement can affect the site, that is the ground upon which a structure has been built. Phenomena like heave, landslip, settlement, and substance can damage property and upset owners or occupants at (excuse the pun) ground zero. Of these phenomena, the differences between substance and settlement are essential to understand, as this difference may significantly affect you.

Without getting too technical, settlement refers to the downward movement of a building (or parts of the structure) due to the soil being compressed by the building’s weight. In contrast, substance refers to the sinking of a building, which pulls the property’s foundation with it. Possible causes of substance are clay shrinkage, mining, trees, water (i.e., burst/ leaking pipe), sinkholes and, but not limited to, the decomposition of organic matter. So a good way of understanding the difference between substance and settlement is to ask yourself, “Would the sinking of the building have happened without the weight of the building being applied to the ground?” If the answer is yes, the building would have sunk anyway without consideration of the load. The movement of the building, and hence the associated damage, is likely due to substance rather than settlement.

This is all good and well, but why does this affect you? Well, most household insurance policies and some commercial policies will cover the cost of loss or damage caused by substance, heave, and landslip. Nevertheless, substance cases can be quite complex and require expert data and extensive technical data to identify the symptoms and discover the cause. However, insurance policies do not usually cover the cost of loss or damage caused by settlement. This is why it is imperative that you first correctly diagnose and fully understand the cause of damage that may be reported.

Another fact that is also essential for you to be aware of is that, usually, Insurers only cover the cost of repairing damage or loss caused by substance but, typically, don’t cover the cost of preventing further subsidence. In other words, the policy usually covers the cost of repairing damage caused by the substance (e.g., crack in walls), but NOT the cost of preventing the building from sinking in the future. This is one area in which clashes between clients and Insurers can occur.

If you are unsure about what your household or commercial property insurance policy does and doesn’t cover, contact a PBA broker today.

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