what caused the damage - poor maintenance or 'insured risk'?

We receive many complaints where the firm has rejected a claim for damage on the basis that it was caused by poor maintenance rather than by the ‘insured risk’ (something the policyholder took out insurance against, such as burglary, flooding etc).

For example, if a poorly-maintained roof is damaged during a storm, a firm may say that it simply deteriorated with the passage of time (a matter of wear and tear and/or lack of maintenance), rather than having been damaged by the storm (the insured risk). Or if a badly-maintained car is involved in a road accident, the firm may say that damage to the car’s engine was caused by the policyholder’s failure to check the oil level (poor maintenance), not by the accident (the insured risk).

The outcome of such complaints invariably turns on the difficult issue of ‘causation’ (in other words, establishing what caused the situation). When we look at cases that require us to establish causation, we apply:

the ‘but for’ test; and
a common sense approach.

The ‘but for’ test involves posing the question ‘but for occurrence X, would Y have resulted?’. The answer should reveal the likely cause of the damage. However, much will depend on the evidence presented to us, such as loss adjusters’ reports and expert evidence. And we need also to apply common sense. We are looking for the dominant or effective cause of the damage that the policyholder has claimed for.

And sometimes the ‘but for’ test merely produces an answer to the question ‘in what circumstances did the damage take place?’ (the ‘occasion’ of the damage), rather than the dominant or effective cause. Applying common sense normally resolves the matter.

Take – for example – a dispute about a claim for storm damage, made under a buildings insurance policy. The policyholder says that tiles fell off his roof as a result of a storm; the firm says they fell off because of poor maintenance. Both parties accept that it was the high winds at the time that led to the tiles falling off. And weather reports record storm-force winds in the area at the relevant time. The loss adjuster’s report notes that the roof had not been properly maintained. So the issue is whether it was the storm itself, or the lack of maintenance, that caused the damage.

To try to establish this, we apply the ‘but for’ test, asking ‘but for the storm, would the roof have been damaged?’ On the balance of probabilities, the answer is ‘no’. So at first sight it would seem that the claim should succeed. But the loss adjuster’s report contains expert evidence indicating that the roof was extremely old and worn and the tiles were so loose that even fairly moderate winds, significantly below storm force, could have displaced them. Applying common sense in the light of this evidence, we might conclude that the dominant or effective cause of the damage was wear and tear and/or lack of maintenance, rather than the storm.

Whether or not there was a storm, the roof would inevitably have been damaged sooner or later. The storm was merely the occasion of the damage; it was not the cause. So it would not be fair or reasonable to require the firm to pay the claim because that would, effectively, be turning an insurance contract into a maintenance contract.

In a separate case, where water leaked through the roof of the policyholder’s home during a rainstorm and damaged the interior, we concluded that it was the storm that caused the damage, even though the roof was poorly maintained. It is true that – but for the lack of maintenance – the water would not have entered. However, a common sense review of the evidence indicated that the dominant or effective cause of the damage was still the rainstorm. Even though the roof was worn and torn, it was not completely dilapidated. It would have remained watertight during normal levels of rainfall but it could not withstand the storm. The fact that a well-maintained roof could have resisted the storm was, in the circumstances, irrelevant. This storm was the dominant or effective cause of the damage claimed for.

It is important to stress that each case turns on its individual facts and the quality of the evidence. No formula can predict with certainty what the outcome will be. This is why these maintenance cases continue to come before us and why, though apparently straightforward, they can often be among the most difficult to determine.

case studies – what caused the damage – poor maintenance or ‘insured risk’?

28/7
causation – damage to carpet caused accidentally rather than by flood – customer had no accidental damage cover under household policy

When a sewer became blocked, effluent threatened to flood Mr B’s home. He called the fire brigade and they managed to stem the flood but, in the process, they soiled Mr B’s carpet.

Mr B put in a claim under his household policy. However, his policy did not include cover for accidental damage. The firm said that, strictly speaking, it was not liable to pay him anything because the damage was accidental – not caused by an event that he was insured against. However, it agreed to pay the claim on an ex gratia basis.

Mr B was dissatisfied with this. He insisted that his policy had covered him for the damage and he said that the firm should also pay him compensation for distress and inconvenience.

complaint rejected
We concluded that flooding – something that Mr B’s insurance covered – was not the cause of the damage. The damage had been caused accidentally in an emergency situation when the fire fighters had failed to remove their soiled footwear or put down protective covering before walking over Mr B’s carpet.

So the flooding was merely the ‘occasion’ of the damage; the fire fighters would not have been in his house if it had not happened. Flooding was not the dominant or effective cause of the damage and no water had, in fact, entered the property. We considered that the firm had not been obliged to pay the claim and that its ex gratia offer was more than reasonable in the circumstances.

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28/8
causation – furniture warranty – whether recliner chair damaged by insured event of structural fault or by wear and tear/neglect

When Mr G bought a recliner chair, it came with a five-year warranty. Among other things, the warranty covered structural faults, which were defined as including ‘breakage of metal components, including recliner and sleeper mechanisms’.

Shortly before the warranty expired, the chair collapsed when Mr G used the recliner mechanism. The firm rejected his claim on the basis of a report from its upholsterer. This said the chair ‘has obviously had very heavy use and has not been looked after’. So the firm said the cause of the damage was ‘wear and tear and/or neglect, rather than any event covered by the warranty’.

complaint upheld
The warranty contained no exclusion clause for wear and tear – only for neglect, abuse or misuse. The chair had simply been used. It had not been misused or abused. And we did not consider that there was anything Mr G could reasonably have done to maintain or service the internal recliner mechanism in order to prevent its failure.

Given that the warranty expressly defined ‘structural faults’ as including the breakage of recliner mechanisms, we concluded that the firm should pay the claim.

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28/9
motor insurance – whether damage to insured car caused by inadequate repairs or by some other event

While driving home from work one evening, Mr H was involved in an accident. After he put in a claim, the firm’s approved engineers carried out repairs.

However, nine months later Mr H discovered that the front offside tracking (the area of impact in the accident) appeared to be faulty and was causing undue wear to the front offside tyre. Mr H complained to the firm that the approved repairs had been unsatisfactory.

The firm rejected the complaint, saying there was no evidence to support his view. It said that the damage to the front tyre must have been caused by a separate, ‘intervening’, incident that occurred after the accident.

Dissatisfied with the firm’s response, Mr H consulted an independent engineer, who concluded that the damage had happened in the original accident, but had not been seen to as part of the approved repairs. The engineer supported his conclusions with geometric reports made before and after these repairs.

Following a joint inspection of the car by the independent engineer and an engineer appointed by the firm, the firm agreed to pay for the damage to be repaired. However, it refused to reimburse Mr H for the cost of the independent engineer’s report, or to pay Mr H any compensation.

Complaint upheld
Mr H had produced persuasive expert evidence to support his view that the damage was caused by the original accident and/or by the inadequate repairs that followed it.

Following the joint inspection, the firm had already effectively conceded liability. So we felt it was unreasonable for it not to reimburse Mr H for the engineer’s fee. Despite having no basis for disputing the cause of the damage, the firm had maintained its allegations long after it was reasonable for it to do so.

Mr H had proven his case on the balance of probabilities. We awarded him the cost of obtaining the engineer’s report (with interest) plus compensation for distress and inconvenience.

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28/10
motor trade policy – whether damage to machinery caused by accidental damage or whether the damage pre-dated the insured event

Mr N, who owned a vehicle repair workshop, had a motor trade policy that covered accidental damage at his premises. Following a break-in, during which the workshop roof was damaged, Mr N put in a claim to the firm. He said that rain had entered through the damaged roof and seriously affected two machines.

The firm rejected the claim, saying there was no evidence to show that the machines had been damaged accidentally.

Complaint rejected
None of the evidence we examined – which included correspondence from the machine suppliers, an independent engineer’s report, and weather reports – supported Mr N’s view that the damage was caused accidentally, following the actions of a burglar or burglars (an ‘insured event’).

The letters from the suppliers were inconclusive, but the report from the independent engineer clearly indicated that the damage had been caused by internal faults, not by rainwater entering the machines accidentally. The weather reports did not indicate any significant rainfall during the relevant period.

We concluded that the dominant cause of the damage appeared to be mechanical failure and/or wear and tear over a long period. These causes were not covered under the terms of the policy.

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28/11
household buildings policy – whether damage caused by storm or lack of maintenance

Mr K submitted a claim for storm damage to his home after water had leaked in through the roof. The firm rejected his claim on the basis that:

there was no evidence of storm conditions at the relevant time; and
the roof was in such a poor state of repair that water would have entered the property in any event.

However, as a goodwill gesture, the firm offered Mr K 10% towards the cost of replacing the roof. He rejected this, saying he was entitled to the full amount.

Complaint rejected
We studied the loss adjuster’s report and photographs, together with the estimates provided by Mr K’s contractors. This evidence indicated that the property was in a very poor state of repair. No recent maintenance had been carried out to the exterior and even Mr K’s own estimates indicated that the roof needed replacing.

Given the absence of stormy weather on or around the period claimed for, we concluded that the dominant or effective cause of the damage was lack of maintenance, rather than storm or any other insured event. Even light rainfall would have caused the roof to leak.

We considered that the firm had been correct in rejecting Mr K’s claim and that its ex gratia offer had been very fair.