Escape of water: gradual damage, matching tiles and a subsidence non-disclosure
A homeowner claims £18,000 after water escapes from a bathroom pipe joint and damages the kitchen ceiling, floor and a fitted cupboard. The policy has a £250 excess and excludes 'damage caused by gradual deterioration, wear and tear or faulty workmanship'. The loss adjuster finds the joint was installed eight years ago by the homeowner's brother, a competent DIY enthusiast, and had been weeping for several months; there is staining around the joint. The claim includes £3,000 to replace the entire bathroom suite because matching tiles are unavailable. At proposal the homeowner answered 'no' to: 'Has the property ever suffered from subsidence or had structural repairs?' The property had been underpinned five years before the homeowner bought it; the homeowner says the seller mentioned it but they did not think it relevant. The insurer's claims team also receives a complaint that the insurer is 'trying to wriggle out of paying'.
1. Analyse whether the water damage is covered, applying the gradual deterioration and faulty workmanship exclusions.
Read the worked answer
Identify the insured peril. The policy covers escape of water. The immediate event is the failure of the pipe joint. The exclusions must be read carefully: gradual deterioration, wear and tear and faulty workmanship may exclude the cause or the damaged item, but they do not automatically exclude all resultant water damage.
Gradual damage. The joint had been weeping for months and there is staining. Damage that built up before the final failure is likely to be excluded as gradual. Damage caused by the sudden escape when the joint failed may be covered. The adjuster should establish the date of the sudden failure, separate pre-existing staining from fresh damage, and obtain a plumber's report.
Faulty workmanship. The joint was installed by a DIY enthusiast eight years ago. If the work was faulty, the cost of repairing or replacing the joint itself may be excluded. Resultant damage to the ceiling, floor and cupboard may still be covered unless the wording excludes damage caused by faulty workmanship. The insurer should not reject the whole claim without a clause-by-clause analysis.
Matching. The £3,000 bathroom suite claim raises betterment and matching. Check whether the policy has a matching benefit. If not, indemnity may mean repairing the damaged area, not replacing an entire undamaged suite. Depreciation and betterment should be considered.
2. Advise on the non-disclosure under the Consumer Insurance (Disclosure and Representations) Act 2012 and the proportionate remedy.
Read the worked answer
Which law applies. The homeowner is a consumer, so CIDRA 2012 applies, not the Insurance Act 2015. The insurer must show a qualifying misrepresentation: a false answer that was material and induced the policy.
Was the answer false and material? The proposal asked whether the property had ever suffered subsidence or structural repairs. The property had been underpinned five years earlier. The answer 'no' was inaccurate. Subsidence and underpinning are material to a household insurer. The homeowner knew of the underpinning from the seller, so the answer was at least careless and possibly deliberate.
Remedy. If the misrepresentation was careless, the insurer must apply a proportionate remedy: put itself in the position it would have been in had it known the truth. It might have imposed a higher excess, excluded subsidence, or charged more premium. If it would not have insured at all, it may avoid the policy and return the premium. If the misrepresentation was deliberate or reckless, avoidance is available. The insurer should investigate before deciding; it cannot simply void for any inaccuracy.
Link to the claim. The escape of water is unrelated to subsidence, but materiality does not require causation. The remedy still applies. The insurer should explain the decision clearly and handle the complaint separately.
3. How should the complaint be handled, and what are the implications of the matching issue?
Read the worked answer
Complaint handling. Acknowledge the complaint promptly and tell the customer it will be investigated. Follow the insurer's complaints procedure and the FCA rules: aim to resolve within eight weeks and issue a final response with Financial Ombudsman Service referral rights if not. Keep the claim decision and the complaint decision consistent. Do not use technical language without explanation.
Matching. The customer wants the entire bathroom suite replaced to match unavailable tiles. Check the policy for a matching-items clause. If matching cover exists, the insurer may pay the reasonable cost of matching, subject to the limit and excess. If not, the indemnity principle applies: repair or replace the damaged part to a pre-loss condition, not provide a new suite. The insurer may offer a cash settlement reflecting depreciation or a contribution to matching.
Practical approach. Obtain the adjuster's report, a tiler's statement that matching tiles are unavailable, and quotes for repair versus replacement. Consider whether replacing the suite is betterment. Explain the basis of any offer. If the customer remains unhappy, issue the final response and refer to FOS. The non-disclosure issue must also be resolved before a final settlement.