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ombudsman news

issue 68

March / April 2008

complaints involving buildings insurance

issue 68 index of case studies

  • 68/7 - whether insurer responsible for cost of remedying faults in building work carried out as part of a claim for flood damage
  • 68/8 - whether uneven concrete flooring resulted from subsidence or poor construction
  • 68/9 - claim for flooding and damp in basement after exceptional rainfall - whether policy also covered cost of repairing damaged damp-proofing in walls
  • 68/10 - insurer refuses to pay claim for storm damage when it discovers that policyholder is serving a prison sentence
  • 68/11 - whether problem with floorboards was caused by a relatively recent flood or by rot that had been spreading for some years

68/07
whether insurer responsible for cost of remedying faults in building work carried out as part of a claim for flood damage

Mrs C lived in an old mill house which was badly damaged by winter floods, following prolonged rain and storms. She was insured by the same firm for both buildings and contents and she submitted claims under both policies.

The insurer accepted liability and appointed contractors to carry out repairs to the property. After a few weeks, however, Mrs C concluded that the contractors were making unreasonably slow progress. She discussed the situation with the insurer and said she would like to appoint a local surveyor to represent her and supervise the work. The insurer agreed to her proposal and confirmed that it would pay the surveyor's fee.

During the course of the subsequent works, Mrs C's surveyor replaced the existing contractors with a new firm of builders. And Mrs C asked for some additional work to be carried out, at her own expense.

As time went on, Mrs C became increasingly dissatisfied - both with the surveyor and with the standard of the building work. When all the work was eventually completed, she hired a different surveyor to prepare a report on what had been done. He identified a number of faults in the building work and estimated that it would cost just under £50,000 to remedy matters.

Mrs C sent the report to the insurer, together with a claim for the cost of putting things right. However, the insurer refused to meet the claim. It said that as Mrs C had appointed a surveyor to oversee the work, responsibility for any faults lay with him. Mrs C then brought her complaint to us.

complaint upheld in part
It was clear that there were a number of problems with the building work. Some of the faults listed in the report related to the additional work that Mrs C had asked the builders to carry out. We agreed with the insurer that it was not responsible for putting right any defects in this additional work.

However, we said that the repair work relating to the flood damage was a different matter. The insurer had authorised and paid for the work. And it remained responsible for ensuring that the work was completed satisfactorily, regardless of the fact that - with its agreement - Mrs C had appointed a surveyor to oversee the builders.

We said the insurer should pay Mrs C £20,000 to cover the cost of remedying the defects in the work carried out to repair the flood damage.

68/08
whether uneven concrete flooring resulted from subsidence or poor construction

Mr and Mrs B contacted their insurer when they first suspected that their flat had been affected by subsidence. The insurer appointed a firm of surveyors to inspect and monitor the situation.

It became clear that subsidence was affecting the entire block of flats and that a significant amount of work would be needed to remedy matters. The insurer paid for Mr and Mrs B to move into alternative accommodation for eight months, while work was carried out on their flat.

In the event, it was over nine months before the work was finished. And when Mr and Mrs B visited the flat, they concluded that it was still not in a fit state for them to return to. They told the insurer that the uneven state of the concrete floor was unacceptable. They also submitted a long list of "snagging" items that they said needed to be fixed before they could move back home.

The surveyors said that the poor state of the floors was nothing to do with the subsidence or the repair works. It was attributable to the age of the property and the poor quality of its original construction. The surveyors did, however, agree that the "snagging" items needed attention.

The insurer agreed to pay for Mr and Mrs B to continue living in alternative accommodation for a further three months. At the end of that time, the couple returned home. However, they remained unhappy about the state of the floors. Unable to get any further with the insurer on this matter, they referred the dispute to us.

complaint upheld in part
In our view, the insurer had acted reasonably in carrying out the repairs and then extending the period during which it paid for the couple to stay in alternative accommodation. We accepted the surveyors' evidence that the poor state of the floors did not result from subsidence, the repair works, or any other insured "event". So we agreed with the insurer that it was not responsible for any work that was needed to restore or improve the state of the floors.

We did, however, conclude that Mr and Mrs B had been caused additional and significant inconvenience and distress by the need to extend their stay in alternative accommodation. We therefore required the firm to pay them £1,000 for this.

68/09
claim for flooding and damp in basement after exceptional rainfall - whether policy also covered cost of repairing damaged damp-proofing in walls

After a period of exceptional rainfall, Mr and Mrs D discovered that the basement of their house had suffered flooding and damp. They put in a claim under their household insurance policy.

After sending an engineer to inspect the basement, the insurer agreed to pay the cost of repairing the flood damage. However, it said it would not meet the cost of making the walls of the basement watertight. The engineer had reported that the damp-proof membrane protecting the walls was in a poor condition and that this had contributed to the problems in the basement.

The couple thought it unreasonable of the insurer not to pay for all the repairs. However, the insurer insisted that it was not liable for the cost of repairing the damp-proof membrane or providing an alternative solution to keep the basement water-proof and damp-proof. It said the damage to the membrane must have been caused by defective design or poor workmanship or by very gradual movement in the surrounding earth.

The insurer pointed out that the policy did not cover such matters. Mr and Mrs D then brought their complaint to us.

complaint upheld in part
The evidence from the engineers suggested that the damage was likely to have been caused by ground movement rather than by any defect in workmanship or design. The insurer said that this type of ground movement constituted a "gradually-operating process" - something that was not covered by the policy.

After reviewing the evidence, we concluded that the ground movement that had, in all likelihood, caused the damage was covered by the policy.

We therefore required the insurer to pay for the cost of installing a new system to replace the damaged membrane and protect the basement.

Mr and Mrs D had also asked to be compensated for the insurer's "undue delay" in dealing with the claim. We did not agree that it was appropriate in this case for the insurer to make such a payment. In view of the technically complex nature of the problem, the insurer had been entitled to appoint a firm of engineers to inspect and report on the damage. The insurer had acted promptly, both in appointing the engineers and then in completing its consideration of the claim, once the report was ready.

68/10
insurer refuses to pay claim for storm damage when it discovers that policyholder is serving a prison sentence

Mr and Mrs T put in a claim under their buildings insurance policy after their small, sea-front house was badly damaged in a storm involving wind speeds of up to 100mph and exceptionally high tides.

While it was looking into the claim, the insurer discovered that Mr T was serving a prison sentence. It told the couple it would not have offered them any cover at all if it had been aware of Mr T's conviction. It said that it would not pay the claim and that it was "avoiding" the policy (treating it as if it had never existed).

Mr and Mrs T insisted that they had told the insurer about the conviction. However, the insurer refused to reconsider the matter so the couple brought their complaint to us.

complaint upheld
Mr and Mrs T had been sold the policy by their bank and regarded the bank as their insurer. There was clear evidence that the bank had been fully aware of Mr T's circumstances. In fact it had written to him at his prison address. However, it had not passed on any information about his conviction to the insurer.

The bank admitted that it had received a letter from Mr T in which he had given details of his prison sentence and asked about some concerns regarding both his mortgage and his household insurance. However, it said that Mr T had addressed his letter to the bank's mortgage department - and the correspondence had all been dealt with within that department, not in the insurance part of its business. It said that it was not fair to imply that the one part of the business would automatically be aware of what went on in other departments.

In our view, the staff in the mortgage department of the bank should have realised that they needed to pass on to the insurer the information that Mr T had provided about his conviction and imprisonment.

We noted that a few weeks after the bank's mortgage department had replied to Mr T, the bank had sent him the standard questionnaire it sent all policyholders when their insurance was due for renewal. When he completed the questionnaire, Mr T referred to his recent correspondence with the bank about his "changed circumstances and conviction". However, it appeared that no one at the bank had passed on to the insurer what Mr T had written on the questionnaire.

We did not think it likely that Mr T, or his wife, would have been unable to obtain insurance cover - either from the same insurer or from a different one - if the details of his conviction had been known. However, the couple would probably have had to pay an additional premium because of the conviction.

We upheld the complaint. We said the bank should pay the couple the same amount that the insurer would have paid them in settlement of the claim. However, we agreed that it could deduct the cost of the additional premium that the insurer would have charged, if it had been aware of the conviction.

68/11
whether problem with floorboards was caused by a relatively recent flood or by rot that had been spreading for some years

While Mr H was visiting his elderly mother he became aware of a problem with the flooring. After removing the carpet, he discovered that the wooden floorboards and joists were suffering from extensive rot. Acting on his mother's behalf, Mr H then put in a claim under her buildings insurance policy for the cost of replacing the wooden timbers and floorboards.

After investigating the claim, the insurer refused to pay out. It cited an exclusion in the policy that meant it did not cover "loss or damage ... resulting in wet or dry rot".

Mr H complained to the insurer about its decision. He said that the damage must have been caused by a leak at the property four years earlier that had led to the installation of a new water meter and stopcock. As the policy had been in force since that time, and it covered liability for "escape of water and flooding", he said the insurer should pay up.

complaint rejected
We examined all the evidence, including the independent reports that both the insurer and Mr H had commissioned. We concluded, from the scale and extent of the rot, that it was unlikely to have been caused by a single leak, four years earlier. It appeared to have developed and spread over a number of years.

So we said that the insurer was justified in rejecting the claim.

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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.