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ombudsman news

issue 34

January 2004

insurance - "unoccupied" properties

Most household insurance policies say that if you leave your home "unoccupied" for a period of time, normally 30 or 60 days, then you will not be covered for certain "insured perils" (usually theft, attempted theft, malicious damage and escape of water).

But it is often unclear exactly what an insurer means when it talks of a property being "unoccupied". Policies rarely define the term, although it is potentially unclear and ambiguous. Does it mean that the property is uninhabitable- Does it mean the property is incapable of being inhabited to a reasonable degree of comfort, health and safety- Or maybe it is simply that nobody was actually living in the property at the relevant time.

Many of the disputes about "unoccupied" property that are referred to us involve properties that are undergoing refurbishment or renovation. The properties tend to be visited frequently for work to be carried out. But they also tend to be uninhabitable - at least to a standard acceptable to most reasonable people.

Court cases about the Occupiers' Liability Act or the Landlord and Tenant Act have held that a person can "occupy" premises - sometimes for many years - without physically being in them. For example, the person who has legal title to a property may be regarded as the "occupier" even if they never live in the property and it is empty.

In the disputes referred to us, we are likely to follow the Unfair Terms in Consumer Contracts Regulations 1999 in concluding that if the firm has not provided a plain and intelligible definition of terms such as "left unoccupied", then we will apply the meaning that is most favourable to the consumer.

In a number of cases, that may result in our deciding that, so long as the insured property was visited on a reasonably frequent basis, then it was "occupied", even though the policyholder was not sleeping there every night. It is important to stress, however, that we look at the facts of each case on their own merits, rather than applying a strict rule.

We do not consider it good practice for insurers to decline to pay out where the policyholder's breach of a policy condition has been only a technical breach that has not prejudiced the firm's position in any way. So, for example, if it can be established that the event that gave rise to the damage occurred within the first 30 days of the property having been left "unoccupied", then the firm should normally meet the claim, even if the property was not actually visited for a longer period. In such cases, the fact that no one lived in, or visited, the property was probably not material to the circumstances of the loss or damage.

Having said that, we are unlikely to support a policyholder who misrepresents the true situation when taking out or renewing their insurance. Nor are we likely to support a policyholder whose property has simply been abandoned, or has been so neglected that it practically invites unwelcome attention.

case studies - insurance - "unoccupied" properties

34/1
buildings policy - policyholder claims for fire damage after arson attack - firm voids policy on grounds of misrepresentation - says property was "left unoccupied"

Mr S, who worked in London, bought a house near his parents' home in Cardiff. His mortgage lender arranged the buildings insurance and was aware that Mr S had bought the house with the intention of renovating it and then letting it out. Mr S visited the property almost every weekend to work on it, sometimes staying there overnight and sometimes sleeping at his parents' house. One weekend, he arrived at the house to find it had been damaged by fire. He later found this had been a case of arson.

When he put in a claim, the firm refused to pay out. It said it had "voided" the policy (cancelled it from the outset) on the grounds that Mr S had misrepresented the position when he took out the insurance. The firm said Mr S had not made it clear that he did not intend to live in the property long-term. Mr S then brought his complaint to us.

complaint upheld
The firm agreed to reinstate the policy after we pointed out that there had been no misrepresentation. Mr S had made his intentions perfectly clear when he asked the mortgage lender to arrange the policy. However, the firm still rejected the claim, citing the policy exclusion relating to properties that were left "unoccupied".

We did not consider that the firm had acted fairly or reasonably in rejecting the claim. The house had minimal furniture and lacked adequate facilities, such as a lavatory and a working kitchen. However, Mr S was able to provide ample evidence to show that he had visited it frequently to carry out work and to check up on the property. The house was neither abandoned nor neglected and Mr S had not applied for a council tax discount on the grounds that it was "unoccupied".

Because we considered the wording of the policy exclusion to be unclear and ambiguous, we interpreted it in favour of Mr S. We concluded that the property had not been left "unoccupied" for more than 30 days, even though it had not been lived in and was not yet habitable on a long-term basis.

34/2
buildings policy - firm refuses claim for damage following break-in - considers property "unoccupied"

Mr K lived in London but owned a house in Belfast, where he had been a student and where his girlfriend lived. His insurer turned down the claim he made after he discovered the house in Belfast had been broken into and extensively damaged. He then came to us.

complaint rejected
The firm had rejected Mr K's claim because of the exclusion clause in his policy that said it would not meet claims if the property was "left unoccupied".

Mr K told us that he visited Belfast periodically to see his girlfriend and to check up on the house. There was a small amount of evidence that he had visited Belfast occasionally, but we concluded he had simply been staying with his girlfriend. It was doubtful whether he had checked on the property at all.

The house was in such a poor state of repair that it stretched credibility that anyone would be able to live there, even for one night. We considered that the firm's position had been prejudiced by the fact that the house was not lived in.

We did feel that the exclusion clause could have been written more clearly. However, in the circumstances of this case, we thought it reasonable for the firm to cite the clause in order to reject the claim.

34/3
buildings policy - firm refuses claim for water damage after pipes burst - property left unlived in for over a year

Miss Y, an elderly woman, was unexpectedly admitted to hospital and she ended up spending more than a year away from her home. During that period, she had made no arrangements for anyone to visit or check the property.

She subsequently discovered that her home had been damaged when some water pipes had frozen and burst. She put in a claim, but the firm rejected it because she had "left her house unlived in for more than 30 days".

complaint rejected
The property had effectively been abandoned for a very long period and this had led directly to the damage. We established that it would have been relatively easy for Miss Y to have ensured the property was looked after while she was away. We therefore concluded that the firm had acted reasonably in rejecting her claim.

Walter Merricks, chief ombudsman

ombudsman news issue 34 [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.