Public liability / indemnity insurance claim

ir50

As a sole trader I have public liability insurance. I was recently installing a bathroom and during one evening, a pipe joint failed. As a result water leaked through the kitchen ceiling below and onto a 10 month old sofa. This is now ruined. The sofa cost £800 but is now £1600 to buy. My insurance will only honour the original purchase price. The customer cannot now replace the sofa without being out of pocket. They therefore expect me to pay the remaining £800 personally. My insurance company is insistent they work on an indemnity basis and not new for old. I thought the idea of liability insurance was to cover both 3rd party damage and also any financial loss I may incur as a result.
Are they correct?
Can I be forced to pay the difference?

phill99

Legally, they are only entitled to replacement of a sofa in its current condition ie not new for old, but a 10 month old sofa. They can't make you buy them a new sofa.

antrobus

phill99 wrote: »

Legally, they are only entitled to replacement of a sofa in its current condition ie not new for old, but a 10 month old sofa. They can't make you buy them a new sofa.

That's not the question; "The sofa cost £800 but is now £1600 to buy. My insurance will only honour the original purchase price". It's the fact that the price of the sofa has now doubled that's the issue.

ir50 wrote: »

... I thought the idea of liability insurance was to cover both 3rd party damage and also any financial loss I may incur as a result......

That's correct. The problem here I suspect is that you are effectively making the insurance claim on behalf of somebody else. Where your customer to take you to court, the court might well award damages based on the replacement cost of £1600, and then the insurance company would be obliged to pay. It's perfectly understandable that you're trying to do the decent thing for your customer, but the insurers appear to be taking advantage of that.

Practically speaking you could have a look at http://www.sofasofa.co.uk/ where you might find that the £1600 sofa costs a good deal less than £1600.

mikey72

Probably you can be forced to, if your customer goes to court, it's fair to expect the 10 month old sofa to be replaced like for like, and tbh, 10 month old is near enough new. So I guess it's likely they will win, and you will have to pay, as it's you they take to court, not your insurer. Your insurer will most likely need to be reported to the FOS if they refuse to pay on your behalf, and there is a good chance you will win there.

antrobus

mikey72 wrote: »

... Your insurer will most likely need to be reported to the FOS if they refuse to pay on your behalf, and there is a good chance you will win there.

I must admit I thought the FOS would not apply because the OP was a business, but apparently businesses can complain to the FOS if their turnover is less than £1 million which, given that the OP is a sole trader, might well apply here. Hence raising a complaint with the insurers and then taking it to the FOS might well be an option.

phill99

People are getting confused here. The legal basis of reinstatement is that if somebody damages an item, you are only entitled to have a repair or replacement to put you in the same position prior to the damage occurring. Therefore if a sofa is damaged. The law will require that it is only replaced with a sofa of the same value. You cannot demand new for old.

Home Insurers offer new for old as a marketing issue and because that's the contract that they enter into with a homeowner which exceeds the legal requirement.

geri1965_2

The poster above is correct. Liability is limited to the value of the item at the time of the loss, so effectively, how much they would get for their sofa if they had sold it the day before it was damaged.

You need to tell them the matter is in the hands of your insurers and all correspondence should be with them.

a5827

To the original poster, although you are talking about your insurance claim, this is first and foremost a legal issue.

I understand that the customer holds you responsible and is seeking to claim their loss from you, and that you have chosen to make a claim on your public liability insurance in order to deal with this legal claim against you.

It sounds like both you and your insurance company accept that you are legally liable for the damage. As a side point, if a faulty part contributed to the incident you may be able to make a legal claim against the supplier of the faulty part for some of your loss.

So the next step is to "put things right" with the customer. As has been mentioned above, the law only provides that the customer be indemnified for their loss. Their loss would be considered the cost of repairing the sofa, or alternatively the cost of replacing the sofa with a similar sofa (i.e. a 10 month old sofa of similar specification). So your insurance company seems to be following the law correctly and you should let them handle it.

As the customer is not happy with the legal remedy, you may wish to offer further payment to them as a gesture of goodwill, but you cannot be forced to pay more than what you are legally liable for.

mikey72

a5827 wrote: »

..........As the customer is not happy with the legal remedy, you may wish to offer further payment to them as a gesture of goodwill, but you cannot be forced to pay more than what you are legally liable for.

The "legal remedy" will be whatever the judge decides in the small claims court. If it's to replace a 10 month old sofa with a ten month old sofa, the op will have to find one. Not the cash that the customer paid for it originally, which they can't replace the sofa with. If it's nearly new, (which it is) it's not unfair to make the op buy another. Not new for old, if he can find a ten month old one, fine, if not, new will be close enough. If it's gone up in price, so be it. That's not the fault of the customer that they got a really good deal at the time. If the op can find one half the price, would you advocate he replaces it, and gives them the difference in cash?

magpiecottage

antrobus wrote: »

I must admit I thought the FOS would not apply because the OP was a business, but apparently businesses can complain to the FOS if their turnover is less than £1 million which, given that the OP is a sole trader, might well apply here. Hence raising a complaint with the insurers and then taking it to the FOS might well be an option.

This has changed of late.

The complainant must be a consumer (which in the context the OP is not) or a micro-enterprise, which means a business with with less than 10 employees, and a turnover or annual balance sheet of less than €2 million. The €2 million is more than the old £1 million but the "less than 10 employee" rule is a new restriction.

The insurer can stand its ground. However, if the customer sues the OP the insurer will have to deal with it.