Helping to find a fair cash settlement following water damage – Financial Ombudsman Service – Case Study

Background

The Complainant had a water leak in his home and suffered water damage therefore registered a clam under his home insurance policy. The Insurer accepted the claim and requested the Complainant to provide two quotations to repair the damage. Both quotes were around £10,000.

But the Insurer thought some of the work in the quotes was unnecessary as they included plastering the entire walls. Insurer said their own builder considered £6,000 was a more reasonable cost of repairing the damage. The Complainant thought it was unfair that he should be left with a shortfall between his quote and the Insurers offer in a cash settlement offer.

The policy terms gave the Insurer the option to settle the claim by repair or cash settlement. The Insurer felt this meant they could offer what they thought was a fair value for the work.

Decision

After investigations the FOS established that the Insurer wasn’t offering the Complainant the chance to use their builder who proposed that £6,000 was a reasonable cost to repair the damage. The Insurer was choosing the cash settlement option. The FOS believed the Insurer had the right to make that choice but the settlement amount would only be fair if it was enough for the Complainant to carry out the repairs himself.

The rooms damaged were two bedrooms and an en-suite bathroom, which the Insurer accepted had been damaged by the water leak. The FOS contacted one of the builders to ask about the plastering point the Insurer had made regards the plastering of the walls.

The builder stated that repairing patches of the plaster was unlikely to work. This was because there was a high risk that the new plaster wouldn’t bond with the old plaster.

The FOS decided to uphold this complaint. The two quotes suggested the realistic market price to the Complainant was around £10,000 so that’s what the cash settlement should be based on.