Why Wear and Tear Is One of the Most Misunderstood Commercial Insurance Exclusions

A storm rolls through. A commercial property owner submits a claim for roof damage and water ingress. The insurer sends an assessor. The assessor finds that three sheets of roofing were already loose, the gutters had not been cleared in over a year, and the waterproofing membrane was well past its serviceable life.

The insurer declines the claim. Not because a storm did not occur. But because the primary cause of the damage was not the storm. It was the condition of the roof before the storm arrived.

The client is surprised. The broker has a difficult conversation. And a claim that seemed straightforward turns out not to be.

This scenario plays out regularly in commercial insurance and it is almost always preventable.

What the Wear and Tear Exclusion Actually Says

Commercial insurance is designed to protect against sudden and unforeseen events. It is not designed to compensate for the gradual deterioration of assets that were not maintained. That distinction is the foundation of the wear and tear exclusion.

Most commercial policies contain wording to the effect that the insurer will not be liable for loss or damage caused by or resulting from wear and tear, gradual deterioration, rust, corrosion, mould, or lack of maintenance. The exact language varies between insurers but the principle is consistent across the market.

The exclusion exists for a sound reason. If insurers were required to pay for losses caused by neglect, premiums would rise significantly. Policyholders who maintain their property would effectively subsidise those who do not. The exclusion keeps the cover sustainable and correctly allocates the responsibility for maintenance to the insured.

The problem is not the exclusion itself. The problem is that most commercial clients do not know it exists until a claim is declined because of it.

Why This Exclusion Is Particularly Consequential for Commercial Clients

The National Financial Ombud Scheme (NFO) 2024 data shows that wear and tear, gradual deterioration, and lack of maintenance were the most common reasons for claims being turned down across commercial insurance in the year.

Commercial properties carry higher maintenance obligations than most clients appreciate. A retail premises, a warehouse, an office building, or a manufacturing facility all have components, roofing, gutters, electrical systems, plumbing, fire suppression systems, security infrastructure, that require active, documented upkeep. When those components are not maintained and a loss occurs, the insurer’s assessor will determine the proximate cause of the damage.

If that proximate cause is the condition of the asset rather than the insured peril, the claim may not respond.

The Proximate Cause Question

The proximate cause of a loss is the dominant, effective cause that produced the damage. In insurance claims, it is the question the assessor is always asking: what actually caused this loss?

This matters because an insured peril and a wear and tear exclusion can both be present in the same claim. The question is which one was the proximate cause.

A storm that rips a well-maintained roof from a building is a storm claim. An assessor who finds that the roof was already compromised before the storm will argue that the proximate cause of the damage was the condition of the roof, not the storm. In that scenario, the insurer can invoke the wear and tear exclusion even though a storm did in fact occur.

South African law places the burden of proof on the insurer to demonstrate the applicability of an exclusion clause. The insurer must provide the specific policy wording on which the rejection is based. But in practice, where an assessor’s report concludes that poor maintenance was the dominant cause of the damage, that report carries significant weight and is difficult to challenge without documented evidence that the property was properly maintained.

This is where the broker’s role becomes critical. A client who can demonstrate a history of documented maintenance is in a substantially better position than one who cannot.

Where the Exclusion Most Commonly Affects Commercial Claims

Roofing and building fabric

Roof damage is one of the most disputed areas in commercial property claims. Storm damage to a well-maintained roof is generally covered. Storm damage to a roof that was already deteriorating is frequently challenged. The distinction turns on what the assessor finds when they inspect the property after the loss.

Gutters, drainage, and waterproofing

Blocked gutters and failed waterproofing are among the most common maintenance failures identified in commercial property claims. Water ingress that results from a blocked gutter or a failed waterproofing membrane is typically excluded on the grounds that the damage was gradual and preventable.

Electrical infrastructure

Electrical faults that develop gradually through ageing wiring, overloaded circuits, or failed insulation may be treated as gradual deterioration rather than sudden and unforeseen events. Where an electrical fault leads to a fire, the proximate cause question becomes important. A fire caused by a sudden fault in a maintained system is different from a fire caused by wiring that had been deteriorating for years.

Plant and equipment

For commercial clients with production equipment, the wear and tear exclusion is particularly relevant. Machinery that breaks down as a result of age, inadequate servicing, or operating beyond its rated capacity may fall outside the cover. This is especially important for clients who rely on a specific machine to generate income and have not maintained a proper service record.

Vehicles

Commercial vehicle claims can be affected where a vehicle was not roadworthy at the time of the incident. A tyre blowout on a commercial vehicle with tyres worn below the legal minimum presents a different picture to an assessor than a blowout on a well-maintained fleet.

Before and After the Conversation

Before the maintenance obligation is addressed: A commercial property owner operates a warehouse from a building that is approximately fifteen years old. Maintenance has been inconsistent. After a significant rainfall event, water enters through the roof and damages a significant amount of stock. A claim is submitted for the stock loss and structural damage. The insurer’s assessor finds the roofing system was in a state of disrepair, with failed waterproofing and several areas of rusting that pre-dated the rainfall event. The claim is declined on the basis of wear and tear and gradual deterioration. The client had no documentation of any maintenance activity on the roof. The broker had not raised the maintenance obligation at the last two renewals.

After the maintenance obligation is addressed: At renewal, the broker reviews the commercial property schedule with the client and specifically addresses the maintenance conditions in the policy. The client is advised that the policy requires the building to be kept in a reasonable state of repair and that a failure to maintain the property could affect a claim. The client commissions a roof inspection and attends to the identified maintenance. When a rainfall event causes damage the following year, the assessor finds the property was in good condition and the damage was caused by the severity of the storm rather than the state of the roof. The claim is paid.

The difference between these two outcomes is a single conversation at renewal and documented evidence that it happened.

What the Broker’s Role Looks Like in Practice

The wear and tear exclusion is not something most clients will read in their policy document. Most commercial clients do not read their policy documents until they need to make a claim. By then it is too late to address the maintenance gap that has already developed.

The broker’s role is to make the obligation visible before it becomes a claims issue. At inception, explaining the maintenance duty clearly and confirming that the client understands what the policy requires of them. At renewal, asking specifically whether any maintenance has been deferred and whether there are any known issues with the insured property or equipment that have not been addressed.

Where a client discloses known maintenance issues, those need to be communicated to the insurer. A broker who knows a client’s roof is in poor condition and does not disclose that at renewal is in a difficult position if a subsequent claim is declined.

Documenting these conversations is not administrative overhead. It is the evidence a broker needs if a claim is disputed and the question of whether the maintenance obligation was explained becomes relevant.

In our experience, the wear and tear exclusion surfaces most often in claims where the renewal conversation was focused entirely on premium rather than on whether the policy still reflected the client’s actual risk. A broker who makes the maintenance obligation part of every commercial renewal conversation is delivering something the client cannot get from comparing quotes.

When a Wear and Tear Rejection Can Be Challenged

Not every wear and tear rejection is correct. Assessors can reach conclusions that are not supported by the actual condition of the property. When a broker believes a rejection has been applied incorrectly, there is a legitimate basis to challenge it.

In terms of South African insurance law, the burden of proof sits with the insurer. The insurer must demonstrate that the exclusion applies. They must identify the specific policy wording they are relying on and show that the proximate cause of the damage was wear and tear or lack of maintenance rather than the insured peril. A vague or general reference to poor maintenance without a detailed assessor’s report to support it is not sufficient.

Three things strengthen a challenge to a wear and tear rejection.

Documented maintenance records. If the client can produce evidence of regular maintenance, inspection reports, contractor invoices, or service records that demonstrate the property was being looked after, those records directly contradict a finding of neglect. An assessor’s opinion that a roof was in poor condition is a different matter when the client can show it was professionally inspected and repaired six months before the incident.

An independent assessment. Where the insurer’s assessor has concluded that the damage was caused by gradual deterioration, the client has the right to commission an independent assessment. If that independent report reaches a different conclusion about the condition of the property and the cause of the damage, it provides a basis for disputing the insurer’s findings.

The burden of proof. A broker who understands that the insurer must prove the exclusion applies is in a better position to push back on a rejection that relies on generalised findings rather than specific evidence. A rejection that says the roof was in poor condition without specifying the nature of the deterioration, when it developed, and how it was the proximate cause of the loss is a rejection that can be questioned.

The formal process for challenging a rejection is a written representation to the insurer within the timeframe specified in the repudiation letter, which must be at least 90 days. If the internal challenge does not succeed, the matter can be escalated to the National Financial Ombud Scheme. The NFO’s overturn rate on disputed claims is not insignificant and it is worth pursuing where the grounds for challenge are sound.

If you have commercial clients whose properties or equipment may be at risk of a wear and tear-related claim dispute, that is worth a conversation before a loss makes it urgent. Call us on +27 11 482 9288 or contact us here.