A dispute about a policy limit and how excess was applied

Home and building insurance Home Emergency Insurance

Danyal claimed for a broken boiler and complained to us that his insurer had unfairly applied an excess payment

What happened

Danyal made a claim for a broken boiler under his home emergency policy. The insurer said the total cost of the claim was £700 but there was a policy limit of £500. This meant that the most they’d pay would be £500. This would be after Danyal paid £50 excess.

Danyal was unhappy about the claim limit because it meant he would have to pay for the rest of the repair costs. He was also unhappy about the excess. He felt it was unfair for the insurer to pay only £450, as it meant he would have to pay the other £250. So he made a complaint to us. 

What we did

It’s common for home emergency policies to have a claim limit, but we considered this to be a significant limitation of Danyal’s policy.

First, we checked whether the claim limit was pointed out sufficiently when Danyal bought his home emergency insurance. We saw that the policy documents clearly explained the £500 limit, so we felt it was fair for the insurer to rely this. 

We then looked at the policy definition of ‘excess’. The terms said excess was ‘the amount of money that must be paid by the insured as the first part of each and every claim’.

We thought that the definition was reasonable. However, we felt that the excess should be deducted from the total claim, not the policy limit. This is because the wording said the excess was the ‘first part’ of every claim. Here, the claim cost was £700, not £500. If the excess was taken from the policy limit, Danyal would not get the benefit of the full claim limit.  

We upheld Danyal’s complaint. We said the excess should be deducted from the £700. Then the insurer would pay their contribution of £500, leaving Danyal to pay £50 excess and £150 of the extra costs – not the £250 the insurer originally said he should pay.