Anyone else had problems with Zurich home insurance?

Flossiesdoll

Last month I could hear water dripping into the bath and couldn't work out why as the shower had been turned off since the morning. I went to have a look and water was dripping steadily from the ceiling. My bathroom ceiling is a false ceiling, plasterboard, hiding the boiler flue and there are no pipes above it. I went upstairs and checked with the bloke in the flat above and he said "no, no, everything's dry." So I made him come downstairs and look at the water dripping through my ceiling, and he said he would go and take his bath panel off and check.

Half an hour later he came back down and said everything was fine up there so I realised I had no option but to call a plumber. Luckily my work brings me into contact with tradespeople and I have a good relationship with the excellent Special Care Bathrooms of Edinburgh who I would be delighted to recommend to any of you . I have one of their guys' numbers in my work mobile so I rang him and he kindly came himself, all the way from Ormiston on a Tuesday night.

He took a board out of my false ceiling and we realised that my real ceiling and the top flat's floorboards are wet and rotten through, and I have a lovely crop of fungus growing over the top side of my false ceiling. There was lots of water visible. We went upstairs and got the neighbour to come down and look, and then we went upstairs and Garry had a root around in the upstairs kitchen and bathroom and found the problem in seconds. Upstairs, which is a rented flat, has clearly been plumbed by morons. Various things weren't connected properly, including the toilet overflow (that wasn't connected at all) and the bathroom sink waste, and water had obviously been soaking into the floor and into my ceiling for months, if not years.

Rang a pal in housing section who found out that although the flat is a private let, the landlord isn't registered, which is not legal, so the lettings bit of the council are going to chase that up, and meanwhile my pal was checking other databases to find out who the owner is.

Eventually got a name and address for the owner, got his number from the phone book, rang him and he said nobody had notified him of the problem. He agreed to send a plumber out straight away but didn't seem to be appreciating the state of the floor.

The next day my insurance company - Zurich - phoned to say I have 3 options for the repairs. They are

1) get one estimate from a contractor of my choice, and forward that to them with photographs of the damage. They will review the estimate and the damage, which will take 7-10 days, and then give me the go ahead to get the work done, and issue a cheque for the full amount minus the £75 excess.
2) do the repairs myself

once I'd stopped laughing she told me option

3) get the insurance inspectors to inspect it, they will do a report for the insurance company, they will review it which will take 7-10 days and then their people will come and repair it.

When I got to work, the owner of the flat above phoned to say he was meeting a plumber here that day to inspect the damage, and could I give them access so they can inspect my flat too. And he said "I do know a bit about it because I'm an architect." He came in, flashed his torch around my bathroom, muttered a bit and then said something like "my tenant is a plumber and he's repaired the leak and you just need to keep the ceiling uncovered to let it dry and when you think it's dry, let me know and I'll come and make it good." I felt like he was seconds away from patting me on the head and saying "there there dear, don't worry your pretty little head about it, I'll sort it out." I managed not to hit him, and I told him that I really wasn't happy that he'd let the tenant fix it, seeing as the tenant hadn't noticed the disconnected pipes in the first place, and that I was more concerned about the rotting floor/ceiling, and that he would not be making it good himself, my insurance company would be dealing with it through a contractor of my choice. He didn't seem too pleased about that and wouldn't answer my questions about the safety of the floor.

My chosen contractors came to inspect the damage and confirmed that the bathroom would have to be ripped out, the ceiling and floor have to be ripped out, the room has to be dried out, and then the floor and ceiling have to be rebuilt and the fittings put back in. Because of the extent of the work required, Zurich then sent out their own inspector.

They're refusing to pay out. They say there's a general exclusion cause in the policy which means they don't have to pay out for anything they call "gradual damage." So even though the gradual damage was invisible until it became so severe it was dripping through the ceiling, and I had no way of knowing what was happening, they're refusing to pay. Even though the bloke upstairs was negligent and they'll be able to pursue him for their costs, they're refusing my claim. Apparently I'm supposed to have been able to see my ceiling rotting through the suspended ceiling and I'm supposed to have been able to see my floor rotting under the tiles.

They're insisting that my claim isn't valid because the damage was gradual, even though it's completely unreasonable to expect me to report damage I can't see.

Has anyone else faced a similar situation with in intransigent insurance company, and how did you deal with it? I'm following their formal complaint procedure, and I've contacted trading standards, and I'll go to the ombudsman if I have to, but I'd rather just get Zurich to honour their obligations and pay up.