Escape of water, nine months of delay and a disputed exclusion
Mrs Achebe owns a leasehold flat insured under a standard home buildings and contents policy with a £150 excess. On 12 January a pipe under the bathroom floor fails and water brings down her kitchen ceiling and damages the flat below. She notifies the claim the same day. Over the next nine months the insurer sends three separate requests for the same plumber's report; tells her to obtain a 'cause of loss' statement from the managing agent, which the agent says only the insurer can request; and closes and reopens the file twice when handlers change. In October it offers £4,100 but applies a 'gradual deterioration, corrosion and wear and tear' exclusion, saying the pipe had corroded. Her plumber's report records a failure at a compression joint and no corrosion; the insurer has produced no engineer's report of its own. In the same period she lost £1,800 when a lodger left because the flat was uninhabitable for three weeks. She has now written asking for 'the name of someone who can sort this out properly'.
1. Assess the insurer's handling against ICOBS 8 and the implied term on prompt payment, and say what the insurer should do now.
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Two regimes point the same way. ICOBS 8.1.1 requires claims to be handled promptly and fairly, and ICOBS 8.1.2 requires reasonable guidance to the policyholder and appropriate information about progress. Three requests for the same report, an instruction to obtain a document only the insurer can request, and a file opened and closed twice are unnecessary obstacles: the customer has been made to manage the claim instead of the insurer.
The Enterprise Act 2016, which inserted section 13A into the Insurance Act 2015 for policies made on or after 4 May 2017, implies a term that the insurer pays sums due within a reasonable time. Reasonable time includes time to investigate, but nine months for a £4,100 domestic escape-of-water claim, where most of the delay is the insurer's own process, is difficult to defend. The insurer's protection is that it had reasonable grounds to dispute the claim. The corrosion exclusion could supply those grounds, but only if the evidence supports it: the only expert report on file contradicts corrosion and the insurer has none of its own, so the defence looks thin.
If the delay is a breach, damages are available for loss caused by late payment, which can include the £1,800 lodger income if it was a foreseeable consequence. On the exclusion itself, the burden of proving it rests on the insurer, and an unsupported assertion will not discharge it.
What to do: commission an independent engineer's report immediately, decide the exclusion on that evidence, pay interest on any late settlement and make a clear offer with reasons.
2. Explain the complaint route open to Mrs Achebe, the timescales, and what a referral to the Financial Ombudsman Service would involve for the insurer.
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Her letter is a complaint and should be logged as one, not handled as routine correspondence. The firm must acknowledge it promptly and issue a final response within eight weeks. If it cannot, it must say when it will respond and explain the right to refer the matter to the Financial Ombudsman Service. She then has six months from the final response, and generally three years from when she knew about the problem, to refer the complaint.
The ombudsman decides on the basis of what is fair and reasonable in all the circumstances, not simply on the strict legal position. It will read the file notes, ask why the exclusion was applied, examine what evidence the insurer had and look closely at the delay. That is a difficult position for an insurer with no engineering evidence and a nine-month file.
Remedies can include the amount the ombudsman considers the claim was worth, interest (commonly 8% simple) and an award for distress and inconvenience. Awards are capped at the current limit, which is £430,000 for complaints referred on or after 1 April 2024.
The commercial lesson: settle before the eight weeks expire if the evidence does not support the declinature. A referral costs the insurer in fees, interest and management time, and a complaint about complaint-handling compounds the original failure.