A family of six lost their newly-purchased country home
A family of six lost their newly-purchased country home in a fire that started whilst they were abroad recovering from the stress of moving a family of six some two hundred miles out of London.
They had bought insurance online and completed the application to the best of their knowledge and belief. Upon researching the loss, the adjuster discovered that a previous owner of the property had utilised a partly boarded-in (but not properly ‘converted’ attic space as a ‘snug’. However, the present owner had simply used it as an attic for all the usual ‘let’s keep it in case we need it again’ stuff that we are all prone to hang on to.
This prompted the seller’s estate agent to promote the property as having ‘additional bedroom space’ and so the insurer was advised that they could assert that the new owner, their policyholder, had under-declared the number of bedrooms. The insurer therefore claimed the right to void the policy.
The definition of ‘bedroom’ in the policy was clear and it did not in fact embrace the attic space in the property. The policyholder, when completing the application online, had simply answered the question How many bedrooms?’ on the basis that they counted the rooms on the first floor as bedrooms; they clearly fitted the policy definition of bedroom.
The definition of ‘bedroom’ was not, in fact, the key to unlocking the conundrum. Rather, it was necessary to explore both:
- the rationale of the policy in the context of the rebuilding costs, to show there was no under-insurance; and
- a series of other points of tried and tested insurance practice, in conjunction with the application in practice of the relatively new Consumer Insurance Disclosure and Representations Act 2012. This in itself required interpretation, in the absence of case law to date, based upon the apparent logic of its intention.
The family were left homeless, ‘penniless’ and living in a tent in their garden for months whilst the dispute went on.
The lessons learned from this case, which was satisfactorily resolved after referral to us, include the following:
- Online portals for the distribution and sale of insurance products are sometimes inadequate in the information and guidance they give to the typical consumer proposer about things that experienced insurers may take for granted as being understood by the consumer.
- The algorithms used behind the scenes are entirely remote from the consumer’s appreciation of how the risk selection process points proposers to the insurers, or their agents, willing to offer terms. The consumer cannot be expected to know what ‘risks’ any given insurer will or will not accept or what specific information is required by any specific insurer. If it is not in the online question set a consumer is not going to think further; that, after all, is the purpose of the sites: to make it quick and easy for the consumer/small/micro SME buyers
- An ‘error of judgement’ by a consumer is increasingly likely to occur the further away the seller is from the buyer because that increasing distance removes all ‘education’ of the buyer as to what they are buying and what is expected of them by the insurer.