ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.
The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.
|01/013||extended warranty – option to repair or replace – extent of insurer’s obligation if repair or replacement impossible.|
|01/014||extended warranty – cashback offer – time limit for registration – policyholder in breach of time limit – whether insurer entitled to refuse to register policyholder.|
|01/015||extended warranty – repairs – delay – whether policyholder entitled to compensation.|
The policyholder paid £300 for a five-year warranty in July 1997, covering her new suite of furniture against a number of eventualities including staining. An armchair was stained in February 1999 and the policyholder put in a claim. The insurer sent her a stain removal kit, but this did not successfully clean the chair.
After making two unsuccessful attempts to remove the stain, the claims administrator finally advised the policyholder that the fabric would have to be replaced. The policyholder was asked to submit a fabric sample for matching. Four months passed but the administrator failed to obtain new fabric. Given the lack of progress, the policyholder demanded that her policy be cancelled and that she should get compensation and a refund of the premium. The insurer cancelled the policy and returned the premium, but did not offer any compensation. It stated that the premium refund was the full extent of its liability.
The insurer’s decision to allow the policyholder to cancel as if this brought its liability fully to an end was disingenuous. It had already accepted the claim and, as it had been unable either to remove the stain or replace the fabric, the insurer was required by the terms of the warranty to replace the damaged furniture if no other solution could be found.
The insurer accepted that the policyholder had not been adequately compensated. It acknowledged that she might have felt less aggrieved and frustrated, and therefore less likely to cancel, if it had kept her informed of the progress of her claim. Following our involvement, in addition to the premium it had already agreed to refund, as compensation for distress and inconvenience, the insurer offered to pay the cost of re-dyeing the suite (subject to a limit of the full cost of replacing it). We considered this the appropriate response.
The policyholder took out a five-year extended warranty when she bought a teletext televideo in October 1997. One of the features was a cashback offer, described as "Make a claim or your money back!" Policyholders could obtain a full premium refund if they made no claim during the period. However, the terms of the policy stated that this offer only applied if policyholders registered for the scheme within 21 days of purchasing the policy. The policyholder did not register until January 1999. The insurer refused to accept her registration. It argued that she had not complied with the policy terms and that her breach had prejudiced its position. It contended that it was essential to have accurate information about the potential risk in order to make adequate reinsurance arrangements.
The cashback offer was one of the elements of cover provided for the purchase price of the policy. It was emphasised in the marketing material as a significant benefit. We appreciated that the insurer wanted information regarding potential claims. However, it was not acceptable that largely procedural obstacles should be placed in the way of policyholders, primarily to minimise the number of otherwise justifiable claims. "Small print" procedural requirements such as this were wholly inappropriate and might well be considered unfair contract terms.
We therefore required the insurer to issue the policyholder with a certificate of registration and to pay her £25 to compensate her for her costs in pursuing her complaint. We noted that the policy also stipulated that a cashback claim would only be valid if the policyholder returned the certificate to the insurer within 30 days of the end of cover. Although this clause had not formed any part of this complaint, we considered it likely that a claimant’s failure to meet the insurer’s strict deadline would not be sufficient ground for rejecting the claim.
The policyholder began to experience problems with his video cassette recorder (VCR) in May 1999. He notified his insurer, in accordance with his extended warranty, and his VCR was taken away for repair. It was returned in mid-June but broke down again in late August. It was taken away again but the tester was unable to trace the fault until it had been returned once more to the policyholder. It was eventually restored to full working order in November. The policyholder sought compensation from the insurer for six months’ loss of use, poor claims handling and inconvenience. He said he had to make at least 50 calls to the insurer and had been visited 25 times by technicians. He had been given a replacement VCR while his was undergoing repairs, but only for two weeks. He also claimed that his warranty period should be extended for a further six months.
While we did not doubt that the policyholder had experienced much inconvenience, we did not agree that the insurer or repairer had failed to provide a satisfactory standard of service. The fault was difficult to diagnose and only became known when the VCR was replaced in its usual cabinet.
It could not be said that the policyholder had lost the benefit of six months’ cover under the warranty. If another fault had appeared, the insurer would have met a claim. The insurer was not obliged to arrange for the loan of equipment while repairs were being carried out, or to offer compensation for inconvenience.