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ombudsman news

issue 35

February/March 2004

insurance disputes involving personal possessions

Customers sometimes assume that if they buy a standard household contents policy, all their personal possessions will be covered against all risks, anywhere in the world. This is rarely the case. Contents insurance policies do not generally cover your personal possessions while they are temporarily away from the home unless you have paid an additional premium for this additional level of cover. Where this is the case, we consider it good practice for firms to explain that if customers do not take up the optional additional cover ("all risks" cover) they will be left without cover for any contents that are temporarily removed from the home.

However, even when policyholders have bought "all risks" cover for their personal possessions, they may find that it doesn't, in fact, cover all risks. Most of these policies cover only those personal possessions that are designed to be portable or that are normally worn on the person, such as clothes, jewellery, sports equipment, musical instruments, etc.

If the policy does not make it clear which items are covered and which are not, then confusion is likely. Specific exclusions usually mean that the policy will not cover certain portable or wearable items, such as tools, laptop computers, software, spectacles, contact lenses, etc. And although certain items (such as sports equipment) may appear to be covered, the policyholder may find that the cover does not apply when the items are in use - rather than simply being carried or transported.

Complaints about personal possessions cover often arise after possessions are stolen from an unattended motor vehicle. Some policies don't cover such losses at all - others cover them up to a monetary limit of, say, £1,000. However, any cover is normally only provided if the stolen items were taken from a "locked or concealed compartment" (such as a glove box or boot).

Travel policies generally provide limited cover for certain personal possessions. The usual restrictions apply where, for example, items are left unattended or are not worn or carried about the person.

The increased risk of loss or damage while travelling means that the limits in travel policies tend to be relatively small. Customers do not always realise that if their policy covers only part of their actual loss, they may be able to recover the balance from another policy, such as their household or purchase protection insurance.

Where customers do this, we will not allow insurers to escape liability for the balance by simply citing the standard clause about not paying out on "claims covered by any other policy". This clause is designed to prevent policyholders from benefiting unfairly by claiming the full amount of their loss from two or more different insurers (a practice known as "double recovery"). The clause is not designed to prevent policyholders from legitimately spreading their risk between insurers.

If an insurer turns down a claim on the grounds of reasonable restrictions and limitations that it has stated in its policy in clear, plain language, then we are likely to support it. It is, after all, an insurer's legitimate commercial right to determine the limit of the risks it is prepared to cover. But customers must be able to understand the nature and scope of what they have bought. Where we find ambiguities in the policy, we will resolve the matter in favour of the customer. As always, the key for the insurer is to set out the policy details clearly, so that customers do not have any nasty surprises when they come to make a claim.

case studies - insurance disputes involving personal possessions

35/1
customer unable to recover full amount of claim under contents insurance policy - value of damaged property exceeded the policy limit - whether firm right to reject customer's claim for the balance under his purchase protection policy

Mr K accidentally dropped and damaged his new camera one afternoon when he was taking pictures of his family at a local carnival. The camera was worth about £4,000 and Mr K put in a claim under his household contents policy. He had paid an additional premium on this policy to obtain cover for his personal possessions while they were outside the home.

Mr K's contents insurer accepted the claim. However, it only paid him £1,500, as this was the policy limit. Mr K then tried to obtain the balance from his purchase protection insurer (firm C). Firm C rejected the claim on the grounds that its policy contained the following exclusion: "This policy does not cover... loss or damage insured under any other policy or which would have been insured under another policy but for the application of a policy excess." Mr K then complained to us.

complaint upheld
The clause in this particular policy was similar to that found in many types of policy. We consider the purpose of such clauses is to prevent policyholders making a "double recovery" (claiming for the full amount of the same claim - from two different insurers). We did not consider the clause to be inherently unfair or unreasonable, provided the firm applied it appropriately, so as not to exclude genuine losses that were otherwise uninsured.

Mr K had recovered only part of his actual loss from the contents insurer. We therefore considered that it was fair and reasonable for him to ask firm C to cover the balance - and for it to do so, subject to the policy excess and limit.

35/2
whether electricity generator came under policy's definition of "personal possessions"

When Mr J's electricity generator was stolen from a local stable, where it was being kept temporarily while in use, he made a claim under his household policy.

The firm rejected the claim. It said the generator was not covered when it was outside the home. The only "personal possessions" that the policy covered outside the home were "Items which you... would wear or carry around for personal use, adornment or convenience ...". Mr J then complained to us.

complaint rejected
We felt that the firm's policy definition was worded sufficiently clearly to exclude Mr J's claim. The firm intended only to cover certain sorts of items - those that were portable. It could not reasonably be said that a bulky electricity generator was an item that you would carry around for "personal use or convenience". We therefore rejected the claim.

35/3
customer's claim for stolen computer - whether firm correct to say computer did not fall within policy description of "personal belongings"

Miss G took her personal computer with her when she went to stay with a friend for a few weeks. The computer was a standard desk-top model, not a laptop. There was a break-in at the friend's house shortly after Miss G arrived and the computer was stolen.

Miss G put in a claim under the "personal possessions" section of her household policy but the firm turned it down. It said that her computer did not fall within the policy definition of "personal belongings" which listed "Clothing and Personal Effects (including clothing, jewellery, watches, furs, binoculars, musical, photographic and sports equipment)". Miss G then complained to us.

complaint upheld
We decided that if the firm intended only to cover personal belongings that were designed to be portable, or that were customarily carried about the person, then it should have said so in plain language.

We pointed out that the policy definition included musical instruments. Some musical instruments, such as pianos, are not usually considered "portable". However, the policy did not make any distinction between "portable" and "non-portable" instruments. So non-portable items could fall within the policy definition of "personal belongings". The computer was a possession that was personally owned by Miss G. Since the policy did not specifically exclude computers, we decided the fair and reasonable solution was for the firm to pay the claim.

35/4
customer's furniture destroyed in fire at "storage facility" - whether firm correct in rejecting claim on grounds that items were stored in a "furniture depository"

Mrs A put her furniture into storage while she was having renovations carried out after moving home. Unfortunately, all her furniture was destroyed when the storage facility burnt down. The owners of the facility held no insurance and had been declared bankrupt, so Mrs A put in a claim under her household insurance policy for £50,000.

Her policy covered her against loss or damage for "personal possessions temporarily away from the home". However, there was an exclusion that said items were not covered while they were stored in a "furniture depository". The firm cited this exclusion to turn down Mrs A's claim.

Mrs A argued that the storage facility was not a "furniture depository", but the firm still refused to pay the claim. However, it did offer her a goodwill payment of £5,000.

complaint rejected
We decided that a "storage facility" fell within the ambit of the phrase "furniture depository". It was a place where furniture was deposited. We did not agree with Mrs A that because items other than furniture could be stored there, it could not be defined as a "furniture depository". We concluded that the firm was not liable to meet the claim and that its goodwill payment had been very fair.

35/5
bag stolen from parked car when left covered with a coat on front seat - whether firm right to dismiss complaint on grounds that bag had not been "concealed"

Mr D and his wife left their car in the car park while they were visiting a stately home one afternoon. They returned to the car later in the day to find that a thief had broken into it and stolen Mrs D's handbag. She had left the bag on the front seat, covered with a coat.

Mr D made a claim under the personal possessions section of his household insurance policy. However, the firm said it would not meet the claim because the handbag had not been left in "a locked and concealed boot, concealed luggage compartment or closed glove compartment", in accordance with the terms of the policy.

complaint rejected
The policy exclusion had been very clearly stated and it was evident that the bag had not been left in a "secure concealed compartment". The handbag could easily have been left in the boot. Even though the bag had been covered with a coat, it would have been obvious to an opportunistic thief that the coat could be hiding something worth stealing. We decided the firm acted reasonably in turning down this claim and we rejected the complaint.

35/6
firm turns down claim for sunglasses stolen from car - whether sunglasses had been "effectively concealed from view"

When Mrs M returned to her parked car after a brief shopping trip, she found that a thief had broken into her car. The designer sunglasses that she had left in the pocket of the door nearest the driver's seat had gone.

Mrs M put in a claim under the personal possessions section of her household policy but the firm turned it down. It said this was because the sunglasses had not been left in "a concealed luggage compartment or closed glove compartment". Mrs M then complained to us.

complaint upheld
We considered that, strictly speaking, Mrs M's claim fell foul of the exclusion clause. However, we felt the firm's decision was less than fair and reasonable because the sunglasses had effectively been concealed from view. They would not have been visible to a passing thief and the door pocket was, in many ways, similar to a glove compartment. This thief just happened to strike lucky when he broke into the car. We therefore decided that the firm should pay the claim.

Walter Merricks, chief ombudsman

ombudsman news issue 35 [PDF format]

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.