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FSPO – Decision Ref: 2019-0107 – Under Insurance

FSPO – Decision Ref: 2019-0107 – Under Insurance


The complaint relates to the Complainant’s claim under his home insurance policy arising from damage caused by chimney fire and was subject to the average condition which resulted in under insurance.

The Complainants Case

The Complainant made a claim on his policy following a chimney fire. The Complainant states that the claim was approved, but the Insurer paid out a reduced amount than that quoted for repairs on the basis that the house was under insurance. The Complainant had made a complaint about this and had also increased the sums insured to avoid any further under insurance.

Thereafter, the Complainant suffered further damage to his chimney. The Complainant provided a revised quote to the Insurer which was approved but Insurers would only pay half of the amount despite the fact the Complainant had increased the sums insured.

The complainant believes that the Insurer cannot penalise him for under insurance again as he had increased his sums insured and he seeks payment in the amount of the full value of the necessary repairs as per the quote without any deductions for under insurance.

The Providers Case

The insurer states that the Complainant’s property was significantly under insured. The house was insured with a rebuild value of €250,000 however it is the Insurers view that the property should have been insured for a minimum of €492,906. Subsequently, the Insured agreed that the property should be insured for a minimum of €462,252.

The insurer paid out on the claim in an amount that reflected a percentage reduction in relative to the under insurance. The insurer pointed out that Complainant agreed to the figure and also agreed to the Value at Risk being at €462,252.



Policy Terms and Conditions

The Insurer has identified “Section 7 -Loss Settlement Basis” of the policy in support of its decision to reduce the pay-out on the Complainant’s claim. This section expressly provides as follows:

“Under Insurance Clause If at the time of damage, the Sum Insured is less that the full rebuilding cost, We will pay only for the proportion of the damage the Sum insured bears to such cost.”



The Complainant submitted a claim on his house insurance policy following a chimney fire. The Insurer appointed a loss adjuster who inspected the property and noted that the house was under insured and indicated that it should be insured for a minimum of €492,906.

Following the attendance on site by the Insurer’s loss adjuster, a payment was made to the complainant for €1,333.88. The loss adjuster’s notes record that this amount was agreed with the Complainant at the time. Sometime after this inspection, the Complainant sought a second opinion which concluded that there was more damage which included the clay flue liners which had not previously been identified.

The loss adjuster agreed to revisit its previous settlement proposals and issued a revised settlement proposal which noted that the adjusted cost of the chimney was €4,500.23 and from this amount deducted €2,076.85 this figure representing the percentage of under insurance. The amount after under insurance is arrived at by way of the application of the percentage to which the house was under insured; 250,000/464,252. The conclusion is that €2,423.38 is to be paid to the Complaint after the deductions for under insurance which modifies to €2,373.38 when contents are accounted for and policy excess deducted.

The document notes that, as €1,334.88 has already been paid, a further payment of €1,038.50 was required. Loss adjuster’s notes record that the Value at Risk for the house was reviewed and agreed in the amount of €464,252. The reduction was made as a result of an earlier application of an incorrect rate which failed to take into account that the house was a dormer house.

The under insurance clause formed part of the policy terms and conditions as set out in the policy booklet and as provided to the Complainant at inception. The FSPO accept that Insurer was entitled to rely on this clause set out in the contract.

In the telephone calls recordings the Complainant argued that his revised claim should not have been deducted for under insurance as by this point he had increased the Value at Risk. The FSPO does not accept this argument as a claim is assessed in the context of the policy in place at the time that the insured peril occurred. In this case, that was the chimney fire at a time when the house was under insured. Any subsequent increase to the VAR could not have any bearing on a claim relating to that chimney fire but would only be relevant to damage occurring form an insured peril which occurred after the Value at Risk was increased.

The FSPO does not uphold this complaint.