Insurer rejects an insurance claim for betterment – but expert opinion said it would be needed – Financial Ombudsman Service – Case Study
Background
The Complainant noticed that there was a crack in his garage, so he notified the Insurer of this. The Insurer agreed to cover the claim for subsidence damage. Both the Insurers and Complainants engineers stated that it would be best for the garage to be demolished and rebuilt. This was because the cracking had distorted the frame beyond repair.
The Insurer stated that the garage could be rebuilt on the existing foundations and didn’t warrant an insurance claim for betterment. But the Complainants engineer stated otherwise because it had been built on shallow foundations, he suggested to extent the foundation depth to meet current best practices.
The Insurer didn’t agree to this, as this would count as an insurance claim for betterment. This would mean that the Complainant would get a better garage that he had before the subsidence and the policy didn’t cover this.
Decision
FOS checked the policy and found that it did cover damage from subsidence. It meant that the Insurer was only responsible for repairing what was already there and not adding to it. But this would only be fair if it achieved a lasting effective repair.
The Insurer had removed a nearby tree to help stabilise the ground under the garage. But the Complainants engineer didn’t think that this would be enough to stabilise it completely and believed that there would be further movement and so, have further subsidence damage hence the insurance claim for betterment.
The Complainants engineer also showed the FOS that at the time the Complainants garage was built, the foundations depth was in line with the building regulations. But these regulations have now changed, so the foundation depth didn’t meet the new building regulations.
The FOS spoke to the Insurer and asked for their view. The Insurer agreed with the engineer but stated they would consider any further damage that happened in the next five years.
The FOS believed that replacing the garage on the existing foundations weren’t likely to be a lasting effective repair and thought the Insurer should extend the foundation so it would be in line with the current building regulations. Even though the Insurer said they would consider further damage, The FOS didn’t think this was fair. The expert opinion said that further damage from subsidence was likely, so building a lasting repair now would be better.
FOS upheld this complaint and allowed an insurance claim for betterment.