skip tocontent

ombudsman news

issue 10

October 2001

case round-up

The following cases show some of the range of issues we have considered in the last three months.

Fraud - motor - policyholder submitting false receipt in proof of purchase - whether insurer entitled to reject damage claim.

Miss F submitted a claim after her car was damaged by thieves. The insurer's engineer decided the car was beyond economical repair and the insurer would not settle the claim without proof of the amount Miss F had paid for the car. In fact, Miss F's boyfriend had given the car to her, but she produced a receipt showing she had paid £3,800.

The investigator appointed by the insurer discovered that it was the boyfriend who had purchased the car and that he had only paid £2,700. The insurer advised Miss F that it would not make any payment because she had presented false evidence in support of her claim. It explained that the policy terms justified its rejecting a claim entirely if a claimant submitted any forged or false document. Miss F argued that her boyfriend had given her the receipt and that she had no reason to believe it was not genuine.

complaint upheld
The insurer's liability under the policy terms was limited to settling the claim by paying the car's market value. The insurer's aim in asking to see the receipt was not to establish the car's value but to obtain proof that Miss F had owned the car and to confirm its make, model and age. There was independent proof both of the car's existence and of Miss F's ownership of it. Clearly, we would not support any customer who produced fictitious evidence to gain more than their just entitlement, but that was not the situation here. The insurer's liability would have been the same even if Miss F had told the truth and said the car was a present from her boyfriend.

In the circumstances, we were satisfied that Miss F had suffered a genuine loss and that she had not attempted to claim more than her proper entitlement under the policy terms. We concluded that the insurer should pay Miss F the car's market value, plus interest.

Personal accident - quadriplegia - policyholder disabled in four limbs - policy definition of "quadriplegia" more restrictive - whether policyholder entitled to benefit.

An extremely serious accident left Mr F with a major permanent disability. He was covered under a personal accident policy and the insurer made a payment of £125,000, the policy benefit for paraplegia - paralysis of the lower part of the body.

Mr F claimed he was entitled to a total payment of £250,000 on the ground that he was disabled in all four limbs. The insurer rejected his claim. It stated that Mr F did not fit its policy definition of "quadriplegia" - "permanent and total paralysis of the two upper limbs and two lower limbs". The insurer relied on a medical report it had obtained. This stated that Mr F retained "gross motor function in terms of shoulders and arms" and could "form a primitive handgrip", even though he had lost the majority of his hand function and his "pincer grip" was dramatically reduced.

complaint upheld
When Mr F took out the policy in March 1996, it did not include cover for either paraplegia or quadriplegia. These benefits were added in June 1998, but this "re-launch" of the policy had not included the definition on which the insurer relied. In the circumstances, we considered the claim should be assessed in the light of the ordinary meaning of the word "quadriplegia". Mr F's own medical advisers were satisfied that - in general medical terms - he was "quadriplegic". We therefore considered it unreasonable for the insurer to use a narrower definition. After our involvement, the insurer agreed to pay Mr F the balance of £125,000.

extended warranty - theft - exclusion for claims without proof of "forced and violent entry or exit" - whether proof of theft sufficient.

Among other items stolen in a burglary, Mr O lost his "surround sound" television speakers. Mr O had extended warranty insurance for the speakers, but this only included cover for theft so long as the product had "been stolen by forced and violent entry or exit". The insurer repudiated the claim because Mr O could not provide evidence of "forced and violent entry or exit".

After the burglar had been caught and convicted, Mr O asked the insurer to reconsider his claim. He asserted that the burglar had gained entry to his flat by damaging the front door, its frame and lock. The insurer checked with the police, but rejected the claim again on finding none of this damage was mentioned in the crime report.

complaint rejected
There was a clear distinction between "forced" and "violent" entry. Unless the burglar had entered through an open door or window, his entry was doubtless "forced". However, "violent" required proof of some physical damage to the property. Mr O could produce no evidence of this,so the insurer was justified in rejecting the claim.

personal accident - loss of fingers - assessment of compensation.

Mr J made a claim under his personal accident policy after cutting three of his fingers with a knife. He was dissatisfied with the insurer's offer of £4,221.30, based on loss of function of the affected fingers, and instead sought the full permanent total disablement benefit of £105,000. He maintained that his injuries meant he could no longer use his left hand well enough to continue his job as a sheet metal worker. He also sought compensation totalling £125,000. This comprised: £25,000 for time off work and loss of potential earnings, £20,000 a year for having to seek employment with lower earning potential and £80,000 for loss of the projected value of his company pension scheme.

complaint upheld in part
We did not consider Mr J was entitled to permanent total disablement benefit. This benefit was only payable to those whose injuries prevented them "from engaging in any occupation for which he/she is fitted by reason of education, training or experience for the remainder of their life" and the medical evidence available did not justify this conclusion. Indeed, Mr J had retrained to work as a clerk. The policy did not provide cover for the other consequential losses for which he sought compensation. The policy did provide for 10% of the sum assured to be paid for the loss of use of any finger and we were satisfied the insurer was correct in approaching Mr J's claim on that basis. However, following a reassessment of the medical evidence, we decided the insurer should increase its offer to £5,171.09.

household contents - non-disclosure - convictions - whether insurer entitled to avoid policy.

In 1999, Mr N - a gardener - took out household insurance through his bank. He signed a form stating that he had no criminal convictions. However, when he made a theft claim the following year, the insurer learnt that he had been sentenced to four years' imprisonment in 1985 for theft from commercial premises. As this conviction was still not "spent" in 1999, the insurer treated the policy as if it had never been issued.

Mr N argued that his previous insurance company had been aware of his conviction and had covered him regardless, telling him the conviction was "spent". He also asserted that his bank manager knew of his conviction. However the bank manager was certainly aware that policy applications from anyone with a conviction were unacceptable and there was no record of his having any conversation with Mr N about this.

complaint rejected
Mr N did not provide us with any details of his criminal record, though it seemed surprising that he received such a long sentence for a relatively minor offence. We invited him to clarify this but he failed to respond. We were therefore satisfied that there was no ground for requiring the insurer to alter its decision. Mr N had not provided a correct answer to a clear question and we were unable to accept his contention that the insurer had been made aware of the true facts.

Household buildings - escape of water - exclusion if property unoccupied - whether insurer would have covered unoccupied property.

Mr D was trustee of a trust whose property included a house that he insured under a standard buildings policy. After the house became vacant on 25 October 1999, he left the central heating on and inspected the property once a week, but did not tell the insurer that the house was unoccupied. During December 1999, he was ill for a fortnight and unable to visit the house as regularly as before. When he next inspected the house, at the end of December, he discovered that a pipe had burst, causing extensive water damage.

The insurer rejected Mr D's claim, stating that the policy did not cover damage caused by escape of water if the property was unoccupied for more than 30 days.

complaint upheld in part
It was clear that the house had been unoccupied for more than 30 days when the damage occurred. And we were satisfied that the insurer had taken all reasonable steps to draw Mr D's attention to the exclusion.

However, when we asked the insurer what steps it would have required Mr D to take if he had told it the house was unoccupied, it said it would have required him to keep the central heating on and to inspect the property at weekly intervals. As Mr D had - in fact - complied with these requirements, until he became ill, we considered the insurer should deal with his claim. But because Mr D's illness had prevented him from inspecting the house every week, and this gap in inspections had increased the amount of damage, we decided the insurer should pay 80% of the claim, less the excess.

Walter Merricks, chief ombudsman

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.