skip tocontent

ombudsman news

issue 69

April / May 2008

complaints involving extended warranties

issue 69 index of case studies

  • 69/1- damp-proofing treatment covered by extended warranty - whether insurer can decline claim when policyholder unable to produce original versions of relevant documents
  • 69/2 - leather sofa covered by extended warranty - whether insurer can refuse claim for damage caused by policyholder's children
  • 69/3 - insurer declines to pay claim on car covered by extended warranty
  • 69/4 - insurer declines claim made under extended warranty for damaged leather sofa
  • 69/5 - whether trade federation warranty covered faulty guttering installed with new conservatory

damp-proofing treatment covered by extended warranty - whether insurer can decline claim when policyholder unable to produce original versions of relevant documents

When Mr M discovered that his house was affected by damp, he arranged treatment to overcome the existing problem and prevent any recurrence. The company that carried out the work for him provided a guarantee. It also offered him a certificate of insurance, described as a "backup guarantee". He was told he would be able to rely on the backup guarantee if the building company failed to carry out its obligations to make good any faults in the damp-proofing work.

Some nine years later, Mr M put his property on the market after deciding to move abroad. A survey commissioned by a prospective buyer revealed that his house suffered from recurring damp.

Mr M tried to contact the company that had carried out the damp-proofing work. However, it had long since gone out of business. He therefore put in a claim to the insurer that provided the backup guarantee.

The insurer refused to pay the claim. It said it was a condition of the policy that certain documents were submitted with a claim. These included the original of the building company's initial report on the work required, its quotation for the work and the guarantee it had offered. Mr M had only supplied copies of these documents - not the originals.

After complaining unsuccessfully to the insurer about its refusal to pay his claim, Mr M referred the matter to us. He said he had never been given the original versions of the documents in question and had submitted the only versions he had. He noted that the paperwork the insurer sent him referred to its requirement that policyholders should submit the documents in question and said, "If you do not have them, obtain copies from your contractor now, (they may make a small charge to cover administration) ".

In Mr M's view, this reference to obtaining copies indicated that the insurer was not able to insist on his providing originals. However, the insurer said it would only accept copies if they were authenticated by the original builder.

complaint upheld
We found that the actual policy document contained no information about the procedure for making a claim or the need to supply original documents. This information was in a separate "registration form" sent to policyholders after they had taken out the policy.

We agreed with Mr M that if the insurer intended to insist on policyholders supplying originals or authenticated copies of the documents in question, then it should have made this very much clearer. But in any event, we considered it would be unfair of the insurer to demand that Mr M should produce original or authenticated copies of the documents, when there was no real doubt that Mr M was entitled to the benefit of the policy.

We required the insurer to pay the cost of putting right the damage caused by the failure of the damp-proofing work. We said it should also reimburse Mr M for the administrative fee it had charged him when dealing with, and declining, his claim.

leather sofa covered by extended warranty - whether insurer can refuse claim for damage caused by policyholder's children

When Mrs D bought a new leather sofa she took out a five-year warranty that covered it against accidental damage. Just under two years later she made a claim under the warranty, because a hole had developed in the leather upholstery.

The insurer sent a technician to inspect the sofa. In his report, the technician noted that Mrs D told him the hole had appeared after her teenage sons had been picking at a weak spot in the upholstery. The technician identified this spot as a scar in the leather and he recommended that repair work should be carried out under the policy.

However, the insurer rejected the claim on the basis of the following exclusion in the policy: "The insurer will not pay for costs attributable to or arising from ... any damage, soiling or staining caused ... deliberately by any person, including children".

Mrs D then brought her complaint to us. She admitted that she had caught her teenage sons picking at the hole in the sofa. However, she said that she had tried to stop them. In her view, the damage was accidental and the insurer should repair it.

complaint not upheld
We noted that the technician's report suggested that the nature and extent of the damage was consistent with "interference of a nature scar by fingers". We then considered whether the apparently deliberate acts of Mrs D's teenage children should be treated as accidents, or whether they fell within the policy exclusion that the insurer had cited in rejecting the claim.

We concluded that the policy wording and layout gave such prominence to the relevant exclusion that Mrs D could not reasonably have been unaware of it when she bought the policy. In light of this, the technician's report, and Mrs D's own admission that her sons had caused the damage, we agreed with the insurer that the claim should not be upheld.

insurer declines to pay claim on car covered by extended warranty

When Mr J bought a new car he took out a policy offering a motor vehicle breakdown warranty. This came into effect when the manufacturer's guarantee expired - 12 months after the purchase date. It provided cover for four years.

Around 18 months after the start of the warranty, Mr J's car broke down. He put in a claim, which the insurer paid. A few months later he put in a further claim, totalling £4,000, for repairs and replacement parts. However, the insurer refused to pay up. It said Mr J had "failed to satisfy a policy requirement to ensure the vehicle was serviced by a manufacturer-approved repairer, in accordance with the manufacturer's recommendations".

Under the terms of the policy, a service was required every 24 months or every 12,000 miles. Mr J had arranged his car's second service just 17 months after the first service. However - by the time of the second service, the car had covered an additional 13,377 miles.

The insurer also noted that the manufacturer had accepted responsibility for replacing one of the parts. In the insurer's view, this indicated that the replacement had become necessary because of a "latent manufacturing failure". The policy specifically excluded claims made as a result of such problems. Unhappy with the situation, Mr J brought his complaint to us.

We looked into the details of the repairs that had been carried out, and why they had become necessary. We accepted that the car's second service had been carried out later than the manufacturer's recommendation. However, we were unable to see any connection between the nature of the repairs and the timing of the service. We also noted that the insurer had been aware of the timing of the second service when Mr J had made the first claim, some months earlier.

The insurer accepted our point that there was no connection between the timing of the second service and the nature of the repairs. We asked why it had not objected to the timing of the second service when the first claim was submitted. The insurer said that at the time of the first claim, the policy had been administered on its behalf by a different company, and that company had not checked the service details.

complaint upheld
We said that by accepting the first of Mr J's claims, the insurer had waived its right to reject the claims solely because of his failure to have his car serviced within a certain timescale. And in any event, we did not consider that there had been a significant delay in getting the car serviced. Mr J had exceeded the permitted mileage by something over 10%, but had remained within the 24 months timescale.

We noted that the manufacturer had contributed towards the cost of one of the items that required repair. However, we did not believe that this amounted to confirmation that there had been a "latent manufacturing defect", so it did not entitle the insurer to refuse to pay the balance of the cost of this item.

In all the circumstances of the case, we decided it was appropriate for the insurer to reimburse Mr J for the cost of all the repairs that had been carried out.

insurer declines claim made under extended warranty for damaged leather sofa

When Mr and Mrs C bought a new leather three-piece suite, they took out an extended warranty. The suite was covered by the manufacturer's warranty for the first 12 months. After that time, the extended warranty provided cover for four years for any accidental damage to the leather upholstery caused by "rips, tears, burns, punctures and pets" as well as for 'structural damage' caused by a number of features including "broken zips".

Less than a year after they had bought the suite, Mr and Mrs C discovered that the leather upholstery on the sofa had been damaged where a metal component of the recliner mechanism had rubbed against it. The manufacturer repaired this free of charge under its own warranty.

Unfortunately, eight months later Mr and Mrs C had further problems with the sofa. By then, it was no longer covered by the manufacturer's warranty, so the couple made a claim under the extended warranty. They reported that further damage had occurred since the initial repairs had been carried out. They noted that the frame of the sofa needed repair, the leather was badly marked and the zips on the arm pads were damaged.

The insurer rejected the claim. It said the damage had come about because of the poor standard of the repairs carried out by the manufacturer. The extended warranty did not cover the manufacturer's "negligent failure". Mr and Mrs C then referred their complaint to us.

complaint upheld
After looking closely at the terms of the policy for the extended warranty, we concluded that the wording was very poor. There was considerable uncertainty about exactly what the insurer intended to cover and about how it could invoke various exclusions.

Applying the normal legal test in such situations, we said that since the insurer's policy wording was ambiguous and unclear, it should be interpreted in the manner most favourable to the policyholders, and with their reasonable expectations in mind.

We examined the detailed report prepared by the insurer's technician. This said there was no evidence of any structural damage to the frame of the sofa. The report suggested that some of the decline in the quality of the leather had arisen "as a result of a gradual process through use of the furniture over time" and was therefore not covered by the policy. However, the technician thought that the more serious tears and markings were covered by the policy.

We concluded that the insurer should pay the cost of repairing all of the accidental damage to the leather suite, including rips, punctures, broken zips and everything arising from the manufacturer's failure to carry out previous repair works properly.

whether trade federation warranty covered faulty guttering installed with new conservatory

When Mr and Mrs B had a conservatory fitted to the side of their house, the company that installed it offered them a trade federation warranty. This supplemented the supplier's warranty, which only covered the first year. The trade federation warranty provided cover for faulty workmanship by the conservatory installation company and any "failure of PVC-U windows, doorframes or conservatory roof sections to operate in accordance with the manufacturer's specification".

Around eighteen months after the conservatory had been fitted, Mr and Mrs B discovered some damage to the side of their house. This had been caused by overflows from the gutter that had been installed with the conservatory - and that ran between the conservatory and the main wall of the house. The couple put in a claim under the trade federation warranty.

The insurer rejected the claim on the basis that the damage had arisen because of a fault in the way the gutter had been assembled. The insurer said the policy excluded any loss or damage due to defective design of any part of the conservatory other than the "conservatory roof sections".

complaint upheld
We reviewed the terms of the policy, together with the details of the problem with the guttering and the resulting damage. The gutter was clearly failing to operate in accordance with the manufacturer's specification. We concluded that this was partly because of a miscalculation of the volume of water the gutter would have to cope with. However, the problem had occurred mainly because the gutter had not been installed correctly.

We decided that the insurer should pay the claim, on the basis both that the gutter assembly was itself a "conservatory roof section" and also that its malfunction had resulted, at least in part, because it had not been installed properly.

So we said the insurer should pay all reasonable costs for putting right the problems with the gutter and the resulting damage to the property. We said the insurer should also pay Mr and Mrs B £100 to compensate them for the distress and inconvenience they had been caused.

image of ombudsman news

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.