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ombudsman news

issue 4

April 2001

case studies - lack of clarity in policy documents

04/09 household contents - policy limits - limit for high risk items - whether insurer making limits clear to policyholder.
04/10 household contents - policy limits - valuables - conflicting limits - whether both limits had to be drawn to policyholder's attention.
04/11 personal possessions – mobile phone - cover for lost property - exclusion for unattended property - whether exclusion a significant restriction on cover.
04/12 household buildings - landslip - exclusion for "faulty design" - boundary fence failing to prevent landslip - whether design of fence "faulty".
04/13 travel - cover terminating on return home - policyholder returning home before end of trip - whether cover in force.
04/14 travel - policy limits - loss or theft of cash - whether limits clear.
04/15 medical expenses - exclusion for treatment related to engagement in professional sport - meaning of "professional sport".

04/09
household contents - policy limits - limit for high risk items - whether insurer making limits clear to policyholder.

The insurance Mrs M arranged for her household contents had a standard limit of £7,500 for high risk items. She was sent confirmation of her policy details which stated:

"Your policy will be issued with a limit of £11,500 for High Risk Items and a High Risk Item single article limit of £1,000. If you require the total High Risk Items limit to be increased, please state the amount required. If there are any High Risk Items which exceed £1,000, please provide the descriptions and values in the box below."

Mrs M provided the insurer with details of a number of items she wished to specify separately. When she was burgled, the loss adjusters recommended settlement of her claim at £11,504.09 for the high risk items and £7,179 for the specified articles. The insurer refused to make these payments, stating that Mrs M was under-insured. It said the values she stated for the high risk Items should have been sufficient to include all the specified items as well as those not specified.

complaint upheld
The insurer had failed to make the policy limits clear to Mrs M. The wording of the confirmation details was not plain and Mrs M and the insurer had different recollections of their conversation before the policy was issued. We were not satisfied that the insurer had asked clear questions, as it was required to do under the ABI Statement.

We concluded it was not appropriate for the insurer to reduce the claim because the high risk items limit was insufficient to include the items specified separately. We considered it should meet the claim in full, subject to deduction of the additional premium it would have charged.

04/10
household contents - policy limits - valuables - conflicting limits - whether both limits had to be drawn to policyholder's attention.

Mrs L had a collection of ornaments and claimed £1,200 under her household insurance when her granddaughter accidentally damaged some of them. Initially, the insurer rejected her claim, stating that she had not chosen the optional accidental damage policy extension to her contents cover. She disputed this and the insurer accepted that the ornaments came within the definition of "valuables" for which she was covered. However, it sent her a cheque for only £500, the maximum payable. This was because the policy stated that the single article limit applied to "any item, collection or set".

complaint upheld
There was no doubt that the damaged items were part of a collection or set. However, we agreed with the policyholder that there was a discrepancy in the policy wording. The schedule simply referred to the single article limit and did not mention collections or sets. That limit appeared only on page 21 of the policy.

Moreover, this was a significant restriction which should have been clearly drawn to Mrs L's attention. It would not be difficult for the £500 limit to be exceeded by almost any collection of jewellery, pictures or works of art. The insurer accepted our view that the claim should be met in full.

04/11
personal possessions - mobile phone – cover for lost property - exclusion for unattended property - whether exclusion a significant restriction on cover.

Mr B bought a mobile phone and insured it. The policy provided an indemnity if the phone was lost or stolen. However, it specifically excluded "theft or damage arising where equipment is left unattended by the insured ... in any property, place or premises or in or on any form of public conveyance".

After a shopping trip, Mr B reported that his phone had been lost or stolen, probably after he had left it on a shop counter. The insurer repudiated liability, in accordance with the exclusion. It also contended that Mr B was in breach of a policy condition to take all reasonable precautions to prevent loss or damage.

complaint upheld
Within 20 minutes of realising that he did not have his phone, Mr B returned to the shop where he thought he had left it. The phone had clearly been "unattended" during his absence. However, by applying the exclusion to losses as well as to theft claims, the insurer had severely restricted the cover it purported to provide. This exclusion should therefore have been drawn to Mr B's attention before he bought the policy. Since the insurer could provide no proof that this had happened, we did not consider it could rely on the exclusion.

As to lack of reasonable care, the insurer had to prove that Mr B had been reckless and there was no evidence of this. Mr B had acted inadvertently and had not shown any lack of care. We therefore required the insurer to reimburse the cost of the phone and to add interest to its payment.

04/12
household buildings - landslip - exclusion for "faulty design" - boundary fence failing to prevent landslip - whether design of fence "faulty".

The house Mr A bought in 1992 was part of a new development whose back gardens overlooked a railway embankment. His garden was separated from the top of the embankment by a large fence, set into the embankment with tall posts similar to telegraph poles.

By the following year, the fence was leaning outwards over the embankment and a fissure appeared in the lawn. Mr A replaced the fence and built a patio over the lawn. But by 1995, both were showing signs of downward creep. A new fence was put up in 1997, but did not remedy the problem, so Mr A claimed for the cost of stabilising his property.

The insurer refused indemnity. It concluded that the original fence was built to retain the embankment and its replacement had failed to prevent movement of the site. As the policy excluded damage due to "faulty design", it said it had no liability for the cost of repairs.

complaint upheld in part
We appointed a surveyor to advise whether the original fence had been constructed in order to retain the embankment. He concluded that the builder had not taken the possibility of landslip into account and that the design of the fence could not be regarded as faulty. In any event, we were not persuaded that a fence could "retain" an embankment which lay below it.

We required the insurer to deal with the damage to Mr A's property. However, it did not have any liability for stabilising the embankment. The embankment was not part of Mr B's property and such works would constitute significant betterment.

04/13
travel - cover terminating on return home - policyholder returning home before end of trip - whether cover in force.

Mr and Mrs N took out holiday insurance to cover them from 6-30 October 1998. They spent the first part of their holiday in Italy, where they met an old friend, Mr G. They decided to return home earlier than they originally intended - on 26 October. They planned to collect fresh clothes and provisions before setting off for Wales with Mr G. However, after Mrs N had dropped off her husband at home, together with Mr G, while she went to fill up the car with petrol, she was killed in an accident.

Mr N made a claim under the policy for death benefit of £60,000. However, the insurer said the policy stated that cover "finishes immediately [they returned] to [their] home ... for any reason". Mr N argued, first, that his wife had not returned home since she had merely dropped him off there with Mr G before going to the filling station. Second he contended that the insurance had not expired because the policy was due to continue until 30 October.

complaint upheld
The personal accident section of the policy stated that benefit was payable while the policyholders were on their "trip". This was defined as "any journey or holiday ... which starts and finishes in the United Kingdom ... for which [the policyholder has] paid the premium".

We considered the word "trip" was wide enough to cover a two stage holiday, even though that holiday was broken by a stopover at the travellers' home, provided that it was over by 30 October. The insurer accepted that Mr N had a valid claim for benefit and interest.

04/14
travel - policy limits - loss or theft of cash - whether limits clear.

Mr T took out "gold plus" travel insurance to cover his holiday in Corfu. The policy included cover for loss of money. A table on the front of the policy stated that the limit of cover was £500, although it also said "This is a guide only. Please read the terms and conditions of this insurance".

The policy terms provided:

"We will pay up to £500.00 for the loss or theft of cash or travel cheques, if you can give us evidence that you owned them and evidence of their value. We will pay up to £300.00 for cash for travel outside Area 1 and up to £150.00 for places within Area 1 for gold plus cover, winter sports cover and multi-trip cover only." Area 1 was defined as Europe.

Mr T's money was stolen while he was on the way to Corfu. The insurer settled his claim subject to the £150 gold plus cover limit. Mr T argued that the proper limit was £500, which the insurer had several times confirmed as applicable.

complaint upheld
The policy document was confusing. The first line stated that the insurer would pay up to £500 if a claimant could provide evidence of ownership and value. Mr T had done this. However, the insurer argued that the rest of the section contained a limitation. This was not clear to the reader. Indeed, it was not clear whether the insurer would ever pay up to £500 if the upper limit outside Area 1 was set at £300.

We were satisfied not only that the limit had not been pointed out to Mr T, but that he had been assured there was cover for up to £500. We recommended that the insurer should pay Mr T the outstanding balance between its settlement and his loss, up to £500, and it agreed to do this.

04/15
medical expenses - exclusion for treatment related to engagement in professional sport - meaning of "professional sport".

The policyholder had insurance to cover his family's medical expenses and submitted claims for the cost of treatment for his daughter, a member of the Great Britain Ladies Hockey Team. The insurer made enquiries and established that she had been given an award from the Sport England Lottery Fund (World Class). It considered that treatment of her sports injuries was excluded under the policy. This was because it decided the treatment consisted of "care and/or treatment arising from or related to engaging in professional sport".

The policy defined "professional sport" as "a sport where a fee or benefit in kind is received either directly or indirectly for playing or training". The policyholder stated that the Inland Revenue did not treat the lottery grant as "income". He said the insurer had not notified him when it added this restriction to the policy and he denied his daughter was a "professional" player.

The insurer did meet the claims, but it did not admit liability. The policyholder was dissatisfied with the way the insurer had handled matters and claimed compensation for the distress and inconvenience caused by the insurer's disputing liability.

complaint upheld in part
The insurer seemed to have interpreted its definition of "professional" sports people as including those who were seriously committed players. This extended the definition beyond its generally accepted meaning. The lottery grant was not directly related to past or future appearances, performance or training requirements; it could more properly be described as a charitable donation. We did not agree that it was a "fee or benefit in kind" or that receiving this payment had altered the status of the policyholder's daughter from amateur to professional. We agreed with the policyholder that the insurer was liable for the cost of his daughter's treatment.

However, the insurer's handling of the claims was not unacceptable. We had not agreed with the insurer's interpretation of the exclusion, but the judgment was a fine one and the insurer's position was not without merit. Any annoyance the policyholder had experienced did not amount to material maladministration. We therefore concluded it would not be right to award any compensation.

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.