December 2006/January 2007
The onset of winter inevitably brings an increased risk of burst pipes. And particular problems can sometimes arise if homes are left empty and unheated for any length of time during spells of cold weather.
Many people go away for a week or so over Christmas and the New Year. And - increasingly - those who can afford it are taking the opportunity for an extended break abroad to escape the worst of the British weather. So the following case studies provide some seasonal cautionary tales, as well as illustrating our approach to a variety of insurance disputes involving leaking or blocked pipes.
When a maturing insurance policy produced a larger sum than expected, Mr G decided to spend part of the money on a cruise. He had recently taken early retirement on ill-health grounds and his wife thought a trip to the Caribbean over Christmas and New Year would boost his spirits.
Before the couple left home, they turned off their central heating. They were anxious to save on their gas bill while they were away.
Three weeks later, Mr and Mrs G returned home to find their kitchen flooded with water from the bathroom above. The weather had been particularly cold while they were away and the water in the pipes had frozen, expanding and cracking the metal. As the temperature rose, the ice melted and water flooded out of the pipes, causing extensive damage to the kitchen ceiling, walls and carpet.
The insurer accepted the claim and arranged to put right the damage caused by the flooding. But it would not reimburse Mr G for the cost of calling out the emergency plumber to find the source of the leak and fix it. After complaining to the insurer about this without success, Mr G came to us.
Details of the cover were set out very clearly in the policy. Mr and Mrs G were covered for loss or damage caused by " escape of water". But they were not covered for " trace and access" - the cost of finding and repairing the source of the damage.
This restriction on the scope of the cover was neither unusual nor significant. So it was not something the insurer needed to have highlighted in its policy summary, given to customers at the point of sale.
As with most home insurance policies, the "trace and access" cost and the plumber's fees for replacing the damaged pipe were uninsured losses, which had to be borne by the policyholder. We rejected the complaint.
After a major lottery win, Mr and Mrs W decided to spend some of the money on a three-month cruise. Before they set off on their trip early in the New Year, they switched off their heating and hot water.
The couple returned home at the beginning of April to find that burst internal water pipes had caused a significant amount of damage to their home. As well as the initial problems caused by the flood, the resulting damp had caused the wooden floor to start rotting.
Understandably, Mr and Mrs W were very distressed by what had happened. But they were even more upset when their insurer rejected their claim. The insurer said an exclusion clause in the policy meant there was no cover for " escape of water" if the insured property had been left unoccupied for 60 or more consecutive days.
It had never occurred to the couple that they might not be covered for the situation they were now faced with. And after complaining unsuccessfully to their insurer, Mr and Mrs W came to us.
complaint substantially upheld
Technically, there had been a breach of the policy conditions, since the couple had left their property unoccupied for more than 60 days. However, the insurer's own evidence had established that the area where Mr and Mrs W lived had suffered particularly cold weather in the first 10 days of January. So the flood had almost certainly occurred well within the period during which the property was covered, even if it was unoccupied.
That meant that the "circumstances of the claim" (the burst pipes) were not connected with the breached policy condition. We explained to the insurer our long-established approach to such cases, as set out in issue 34 of ombudsman news (January 2004):
"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..."
We also pointed out that the Insurance: Conduct of Business Rules (which came into force on 14 January 2005) state: "An insurer must not ... except where there is evidence of fraud, refuse to meet a claim by a retail customer on the grounds ... of breach of warranty or condition, unless the circumstances of the claim are connected with the breach." (Rule 7.3.6).
We said the insurer should meet the claim. However, we accepted the insurer's argument that it should pay only part of the cost of replacing the wooden floor. If Mr and Mrs W had not left their home unoccupied for so long, the water damage could have been dealt with more quickly and the floor would probably not have started to rot.
Miss J awoke one morning in early February to find her cottage was unusually cold. The central heating had failed to come on. She was unable to get it to work, so she called out an emergency plumber.
It took the plumber some time to discover the cause of the problem. The outlet pipe from the oil storage tank to the boiler had become blocked with sludge and oil deposits that had built up over the years. The plumber eventually managed to unblock the system and to get it up and running. But Miss J was left with a bill for almost £1,000.
When she submitted a claim to her insurer for damage to the oil tank and pipes, the insurer refused to pay out. It told her this was because there had been no physical damage to the tank or pipes and no " contamination of the surrounding site". The unblocking of the system was simply a matter of maintenance, for which no insurance cover was available.
After arguing unsuccessfully against the insurer's decision, Miss J brought her complaint to us.
We sympathised with Miss J's predicament. However, it was clear that her policy did not cover loss or damage caused by blocked pipes; it only covered loss or damage caused by escape of oil. Fortunately, there had not been any escape of oil.
In principle (and in certain circumstances) "damage" can be interpreted to include loss of function. However, this was not the case here since the "insured peril" (escape of oil) had not occurred in the first place.
In any event, damage resulting from "wear and tear" or lack of maintenance was specifically excluded from the scope of cover. We therefore rejected the complaint.
Mr C's sitting room was badly damaged when water leaked through the ceiling from his bathroom. He called a plumber, who located the source of the leak and fixed it. In so doing, the plumber apparently had to rip out the entire bathroom suite, including the wall and floor tiles.
The insurer accepted Mr C's claim for "escape of water" and it paid the cost of repairing the water damage to the sitting room and replacing the bathroom floor tiles. But it would not cover the cost of replacing the bathroom suite and the wall tiles. It told Mr C it did not think it had been necessary for the plumber to remove these items in order to "trace and access" the burst pipe.
Unhappy with the insurer's response, Mr C brought his complaint to us.
We were satisfied that the insurer's offer had been fair and reasonable in the circumstances. It was a clearly-stated condition of the policy that policyholders should:
Mr C had not contacted his insurer to report the damage until after the plumber had ripped out and disposed of the bathroom suite and wall tiles.
We accepted the evidence provided by the insurer that it had not been necessary to remove the entire bathroom suite and all the wall tiles in order to locate a pipe beneath the floor. In the circumstances, we thought the insurer's offer to pay for Mr C's actual, proven, losses was fair and reasonable. We rejected the complaint.
When a mains pipe burst underneath Ms K's kitchen sink, water flooded everywhere. There was a great deal of damage, particularly to the kitchen units.
Ms K's insurer accepted the claim, but offered her only 50% of the cost of replacing the kitchen units. It pointed out that the units were quite old and had probably already suffered a fair degree of wear and tear before the flood damage occurred.
Ms K said this was unfair, as she could not afford to replace her kitchen units for the amount the insurer had offered.
When we looked into Ms K's complaint, we felt the insurer had not handled the claim fairly and reasonably. Like most home policies, this provided "new for old" cover. The policy did not contain any exclusion for items that had already suffered some degree of "wear and tear". And there was no doubt that Ms J's units had been damaged as a result of a genuine incident.
"Indemnity" policies simply require the insurer to put the policyholder back to their pre-incident position (so far as reasonably possible). But as this was a "new for old" policy, the insurer was required to replace the damaged items with new ones, or to give the policyholder enough money to cover the cost of buying new items.
The insurer pointed out that the terms of the policy gave it the discretion to arrange repair rather than replacement in certain circumstances. However, expert evidence, together with photographs of the units, convinced us that repair would not be a reasonable solution in this case.
Regardless of their previous condition, all but one of the units had been severely damaged by the escape of water. So we said it was fair and reasonable for the insurer to meet the cost of a complete set of new units.
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.