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ombudsman news

issue 30

August 2003

home insurance - "buildings" or "contents"-

People often use the terms "home insurance" or "household insurance" in a general way to refer to insurance that covers any aspect of their home and belongings. However, these policies are usually split into separate sections - "buildings" and "contents" - and not all policyholders will be covered under both sections. It is also possible to buy a "contents-only" or a "buildings-only" policy.

While many homeowners buy both types of cover, some have only one. There may be a very good reason for this. Typically, for example, people who live in blocks of flats will only need to buy a policy to cover their contents. This is because the landlord will be responsible for arranging buildings insurance to cover the entire block. And some policyholders obtain contents insurance from one insurer and buildings insurance from another, because this may work out cheaper than insuring both contents and buildings together.

Even if a policyholder has both contents and buildings insurance, the scope of cover may vary so that, for example, an accidental damage claim might succeed under one section but not under the other. It is confusion about the nature and scope of cover that leads to disputes. The onus is on firms to ensure that the cover they sell is suitable for the needs and resources of their policyholders and that the policyholders understand what they are buying.

buildings insurance covers the structure of the building, plus permanent "fixtures and fittings" such as baths, fitted kitchens etc. The test is - can it reasonably be removed and taken to another home- If it can, then it is part of the "contents" and it will not generally be covered by a buildings policy. Buildings policies usually include outbuildings - garages, garden sheds etc.

contents insurance covers your possessions - your television set, furniture, clothes etc. In other words, just about everything you would take with you if you moved.

While it is generally easy to determine whether an item is part of the buildings or part of the contents, we see plenty of cases where this is not immediately apparent. The way in which a firm categorises certain items can sometimes appear to the policyholder to be illogical or, at worst, a cynical attempt to avoid paying legitimate claims.

For example, a television set is clearly part of the household contents and is covered under the contents policy - as is a portable aerial that sits on top of the set or close to it. But why should a television aerial that is fixed permanently to the roof of the house also be defined as part of the contents- Very few householders would ever think of climbing on to the roof and dismantling the aerial in order to take it with them when they move house. And claims for these aerials are most likely to be made when the roof has been damaged by an "external insured event" (such as storm or lightning) that is covered by the buildings insurance.

Our general approach in the disputes that are referred to us is to regard those items that are fixed and have essentially become part of the fabric of the property as "buildings", while the rest are "contents". So, for example, we would normally consider fitted wardrobes, fitted kitchens and built-in appliances to be covered under a buildings policy, whereas the contents policy would cover items of furniture and appliances that are free-standing or (if screwed to a wall) easily removable.

We obviously have regard to the policy definitions and exclusions. However, where we consider that a firm's policy definition of an item as "contents" or "buildings" was unreasonable, and has led to a perverse and unfair result, we may require the firm to pay the claim.

Like the courts, we follow the industry convention of treating carpets as "contents", even though they are often fitted. Although most people would probably leave their fitted carpets behind when moving home, the fact remains that fitted carpets can be taken up relatively quickly and easily and re-laid to an acceptable standard. It is their transportable quality that properly makes them part of the contents.

But what about laminate wooden flooring- Its increasing popularity over the last couple of years has led to a number of disputes about whether it is covered by the buildings or the contents policy. In a typical case, the policyholder only has contents cover. When the flooring is accidentally damaged, the firm refuses to meet the claim, insisting that laminate flooring is part of the building.

We take the view that most laminate wooden flooring (where the individual planks are glued together and fixed under a skirting board or beading) is a "fixture and fitting", not "contents". Unlike a carpet, it is difficult to remove intact and has, essentially, become part of the building. However, in some instances we may regard re-useable click-together laminate wooden flooring as "contents". This type of flooring is no more "fixed" to a room than a fitted carpet is. Indeed we are aware that some of the more expensive products are specifically marketed as being "easily transportable".

Disputes sometimes arise over items that would normally fall clearly into the category of "buildings" rather than "contents", but have been temporarily removed. If such items are then lost or damaged while they are being stored, can the policyholder make a claim under a contents policy - or are the items still only covered as "buildings"-

Similar disputes can arise where policyholders have bought items, such as flat-pack kitchen units or laminate flooring, which are then damaged or stolen before they have been fitted. Our approach will depend on the circumstances of each case. But in most instances we would consider that the buildings insurer should cover parts of the building that have been only temporarily removed. Whereas new items, which have not yet been fitted, should be treated as "contents", on the basis that they are the policyholder's personal possessions.

In our view, if a policyholder has both buildings and contents cover, and the item claimed for is not specifically excluded by one or other of the policies, then the insurers themselves ought normally to be able to settle any disputes about who should deal with the claim. It does nothing to promote the industry's reputation if policyholders are forced to bring disputes to us simply to obtain payment for a legitimate claim. Where there is real ambiguity about which insurer is responsible for covering the item, then it would seem sensible for each of them to meet 50% of the customer's loss.

case studies - house insurance - "buildings" or "contents"-

30/1
contents cover only - fire - whether council tenant liable to pay own cost of internal redecoration

A fire damaged some of the contents of Mr J's flat, together with the wallpaper and paintwork. He assumed that the council from which he rented the flat would be responsible for redecorating it after the fire. However, the council said this was his responsibility, so he did the work himself and added the cost of the materials to his claim for the damaged contents.

The firm dealt with part of Mr J's claim - for the damaged contents. However, it said that his contents-only policy did not cover the flat's internal decorations.

complaint upheld
We pointed out to the firm that its policy defined "contents" in such a way as to include the internal decorations for which Mr J was liable as tenant. We therefore asked it to reimburse the money Mr J had spent on redecorating the flat.

30/2
buildings cover only - storm damage - whether TV aerial insured as "buildings" or "contents"

Mr W had buildings insurance but had not taken out a policy to cover his household contents. After a storm damaged the roof of his house, he put in a claim under his buildings policy.

The firm agreed to repair the roof, but told him the policy did not cover his television aerial, which was fixed to the roof and had been damaged during the same storm. The firm said that aerials were only covered under its "contents" policy, which Mr W had not bought.

complaint upheld
We concluded that it was neither fair nor reasonable to treat a permanently fixed aerial, such as this one, as "contents", even though (in keeping with widespread industry practice) the policy wording clearly stated that aerials were "contents". Most people would regard such an aerial to be part of the building, because it is permanently fixed and not readily removable. Moreover, an external aerial is far more likely to be damaged by the type of "insured event" that affects the structure of the building, such as lightning or a storm, than by the type of event that might damage contents. We therefore required the firm to meet the claim.

30/3
council tenant - contents policy only - escape of water - whether kitchen units were "fixtures and fittings" or personal possessions

Mrs C, a council tenant, bought some new kitchen units and had them fitted at her own expense. When the units were damaged by an escape of water, she put in a claim to the firm under her "contents-only" policy. However, the firm told her it could not meet the claim. It said the damaged units were not "contents" but "fixtures and fittings", so they would only be covered under a buildings policy.

Mrs C complained that this was unfair, since the units were her personal possessions, not part of the property. When the firm rejected her complaint, she came to us.

complaint upheld
We agreed with Mrs C that the kitchen units, though fitted, could fairly be regarded as her personal possessions. They belonged to her, not to the council. The units could easily be removed without substantially affecting the fabric of the building. And Mrs C said that if she ever moved house, she would remove the units and take them with her. This seemed entirely feasible and we therefore asked the firm to meet the claim.

30/4
laminate wooden floor accidentally damaged - whether floor covering was "buildings" or "contents"

After Mr K's shower leaked, damaging his laminate wooden flooring, he put in a claim to the firm. Mr K had both buildings and contents cover with the firm, but it said it was unable to meet his claim. It told him the damage would only be covered under the buildings section of his policy if he had taken out "extended accidental damage cover". Mr K only had this for the contents part of his policy. When the firm refused his request that it should meet the claim under the contents part of the policy instead, Mr K came to us.

complaint rejected
We agreed with the firm that Mr K's laminate flooring could not properly be described as part of the "contents". It was glued together and fixed under beading to the skirting board. It would be very difficult to lift and relocate the flooring without substantially damaging it. In our view, the flooring had effectively become part of the fabric of the building. Mr K did not have accidental damage cover in the buildings section of the policy, so the firm was not liable to pay the claim.

However, we suggested that Mr K might have a valid claim under the buildings section for damage caused by "escape of water". The firm acknowledged this and subsequently settled the claim.

30/5
buildings policy only - fire - carpets purchased with property - whether carpets "contents" or "buildings"

Mr F had buildings insurance, but no cover for the contents of his property. So when a fire damaged his carpets, the firm rejected his claim on the basis that carpets were "contents". Mr F insisted that the carpets were not "contents", but "fixtures and fittings" and that they should therefore be covered under his buildings policy. The reason he gave was that the carpets were fitted and had been in place (and included in the purchase price), when he bought the property.

complaint rejected
We referred to the Court of Appeal's judgment in Botham v TSB Ltd, which stated that it was doubtful that carpets could ever be regarded as "fixtures". So we concluded that the firm had correctly rejected Mr F's claim. He had not bought contents insurance, so the carpets were not covered. We did not agree with Mr F that his having "paid stamp duty in respect of the carpets" was relevant to the outcome of his complaint.

30/6
contents policy only - storm damage to garage - whether flat-packed conservatory "household goods"

Mr and Mrs D put in a claim under their "contents-only" policy after their garage roof collapsed in a storm and damaged a number of items that had been kept in the garage. The firm agreed to pay for all the damaged items except for a flat-packed conservatory, which the couple had recently bought but not yet assembled. The firm insisted that the conservatory was a "building" and was therefore only covered by its buildings policy, which the couple did not have.

complaint upheld
In our view, the unassembled conservatory could properly be said to be part of the couple's "household contents". It had not yet been erected and comprised a collection of separate components, stored in boxes. We therefore required the firm to pay the claim.

Walter Merricks, chief ombudsman

ombudsman news issue 30 [PDF format]

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.