Subsidence claim - worried about innocent non-disclosure

Hama4075

Hi,

Any advice would be welcomed.  Please don't share horror stories or terrible predictions though!

I'm wondering how to approach dealing with a loss adjuster, in the following situation.  (Sorry, it's long.)

When I bought my house 4.5 years ago I had a Homebuyer's Report.  It included a paragraph saying there was evidence of "structural movement/cracking" in one location, which appeared "to be of longstanding rather than particularly recent or progressive".  There was no recommendation to investigate further or ask questions of the seller (for other things such as electrical work, there were recommendations to look into things further).  When I discussed the Homebuyer's Report over the phone with the surveyor, with regard to that point he said he believed it was historical settlement from when the extension was built.

For my insurance application I was asked "Is the home to be insured showing any sign of, or had any damage caused by subsidence, landslip or heave?".  I answered no.   (I had no idea that structural movement could be the same thing as subsidence so I didn't even raise it as a query with them.  The surveyor never used the word subsidence and if he had I wouldn't have bought the house.)

I recently saw that cracks in that area had opened up and I got a structural engineer to do a report, which said that the likely cause was subsidence.  I raised a claim with my insurance company and was put in touch with a loss adjuster from their subsidence team.  When I sent over documentation I included the Homebuyer's Report (which they'd requested) and realised that it had the paragraph about structural movement.  

I believe that even if it might be viewed as non-disclosure of signs of subsidence on my part when I took out insurance, it was innocent.  I believe I took reasonable care, and couldn't be expected to know there had possibly been subsidence, because the surveyor never used that word.  Therefore, under legislation the insurer wouldn't be able to void the policy on the basis of non-disclosure.  However, my concern is that the loss adjuster and/or insurance company won't look into the finer points of it but will just void my insurance and then I'd have to go through a complaints procedure and the ombudsman, while I had no insurance cover.

Do you think I should try to approach the structural movement issue with the loss adjuster to deal with this up front?   If so, how?  So far, we've had only one short phone call (they're assessing via phone/photos).  During that call he asked a couple of questions but nothing about the paragraph in the Homebuyer's Report.  The next step is for me to email him extra documentation and then he'll ring me if there's anything he needs to confirm.  So I don't know if I'll even get another chance to talk to him before he makes a report to the insurer.  I can't think of a way to say, "In case you're thinking I'm guilty of non-disclosure - I'm not" without sounding dodgy.  Should I just leave it?

Chickenlips

My answer is a full outline of what could happen, you need to be prepared for this. My advice is to have an honest discussion with your adjuster and I have explained why below. It is also possible your claim will be declined, I have explained why below. You need to be prepared for this because you will be responsible for the repairs if it is declined and the repairs will be cheaper the sooner you act. You do have a duty to mitigate the damage going forward, so if your insurance company carry out further investigations in to the non disclosure over several months, this will not be a valid excuse to let the damage get worse (if it appears to be) and your insurance company would be entitled to only pay for the original damage, avoiding the cost of any additional damage over time. If your adjuater indicates that this would be a lengthy process, I'd suggest discussing mitigation with them (they won't be able to tell you what repairs to get, but can tell you if you need to carry out repairs and can advise if costs would be accepted should the claim be successful). Make sure that if they say you do not need to mitigate your loss... you get it in writing! 

In my experience (loss adjuster), I would be up front with them. Non disclosure can be viewed as a fraud indicator, if this adjusting firm views it as this, you may be subject to a fraud investigation (they are not as scary as they sound and generally only result in a negative outcome if there is proof of an attempt to commit fraud). 

The area where you will struggle most is defending the lack of action regarding the cracking. Arguably, if the cracks were visible during your viewing you probably should have gotten a full structural survey. If your surveyor failed to give proper advice at the time, you may have a clear against them but it will depend on what was visible to them on the day of their inspection. If the owners hid or covered up a lot of the cracking, the surveyor may not have been able to see further damage. In addition, a quick Google search of terms could have assisted you in what to do next or getting a second opinion. One visit would not be enough for the surveyor to determine subsidence, but there may be an argument that you should have been advised to get further tests done. Of course, the poor advice of your surveyor does not make your insurer responsible for the damage under your policy. 

Ultimately, your insurer may refuse the claim on the basis that the damage was pre-inception (i.e. the damage occurred and was evident before you purchased the house and policy). It is unclear how they would view you not asking the seller questions about the cracks; house sales are caveat emptor (buyer beware - the onus is on you to ask the questions and carry out checks). Much like anything in life, it is possible to get a  ad surveyor or a surveyor having a bad day, so relying on one opinion and not asking further questions could be viewed as a failure to do your due diligence by asking the seller what investigations had they had done and if subsidence had been ruled out (they would have to be honest with their replies).

You were aware of the cracking when you purchased the property, even if you didn't know it was subsidence, you did purchase it knowing it had cracks. Some insurers ask if they property is free from cracking on their proposal form, if yours did this will be considered non disclosure.

Your insurance company is only responsible, usually, for damage occurring during the period of insurance. Things that happen before the policy begin are not considered by your insurance company as these are not sudden and unforseen losses. Similarly, insurance is not a maintenance contact and does not repair defects within the property, even if you didn't know what they were at purchase. 

If your insurance company decline your claim due to pre inception, you may wish to pursue the surveyor for prejudicing your position regarding the house purchase. 

TELLIT01

It's not unreasonable that a person without construction knowledge would not automatically understand that 'historic settlement' was the same as 'subsidence', and the insurer may well accept that the failure to disclose was not deliberate.  That does not mean they will pay out on the current claim.

Hama4075

Thank you for your replies.  

TELLIT01 said:

It's not unreasonable that a person without construction knowledge would not automatically understand that 'historic settlement' was the same as 'subsidence',

I thought that historical settlement was one type of structural movement, and subsidence was a different type.  My policy defines subsidence as being downward movement by a cause "other than the weight of the buildings themselves", so I hink the insurer is treating the two terms differently.

Chickenlips said:

The area where you will struggle most is defending the lack of action regarding the cracking. Arguably, if the cracks were visible during your viewing you probably should have gotten a full structural survey. If your surveyor failed to give proper advice at the time, you may have a clear against them but it will depend on what was visible to them on the day of their inspection. If the owners hid or covered up a lot of the cracking, the surveyor may not have been able to see further damage. In addition, a quick Google search of terms could have assisted you in what to do next or getting a second opinion. One visit would not be enough for the surveyor to determine subsidence, but there may be an argument that you should have been advised to get further tests done. Of course, the poor advice of your surveyor does not make your insurer responsible for the damage under your policy. 

I asked the seller about the cracks when I viewed the house, but that was verbal.  I wish the surveyor had advised further enquiries, as he did with other aspects of the building.  Instead, his report reassured me.  I thought using a surveyor to do a Homebuyer's Report was due diligence, and that if there was any possibility of subsidence he would have raised that in some way. 

My concern is that if the loss adjuster/insurers see this as possible non-disclosure, they might simply void the policy overnight, and then I'll have to put my case afterwards.  I'll definitely take your advice to raise this issue with the loss adjuster but if he still thinks they should look into it further how do you think they might proceed to do that?  

davidmcn

Hama4075 said:

Thank you for your replies.  

TELLIT01 said:

It's not unreasonable that a person without construction knowledge would not automatically understand that 'historic settlement' was the same as 'subsidence',

I thought that historical settlement was one type of structural movement, and subsidence was a different type.

So would I. I've seen hundreds of surveys and it's pretty commonplace for surveys of any older property to refer to settlement having taken place. I wouldn't have interpreted those comments as meaning that further investigation is needed or that subsidence is a risk.

I don't see a need to have a further chat with the loss adjuster. They've got the survey, wait to see what the response is.

Hama4075

Thanks, davidmcn.  I think it's really useful to get different opinions on this and yours is in line with my actions at the time.

Chickenlips, thank you again for your response and for taking so much time to give me your thoughts.  I've written an email to the surveyor tonight, being completely honest, and asked him to contact me if he wants to discuss anything further.  It was really helpful to hear your views.  

dunstonh

Innocent non-disclosure will require the insurer to pay out on the claim but deduct any increase in premiums that they would have made.  However, if they would never have offered cover in the first place, they will not be required to cover the claim and will refund premiums paid to date.
There is a guide to non-disclosure outcomes at the FOS.

TELLIT01

Hama4075 said:

I thought using a surveyor to do a Homebuyer's Report was due diligence, and that if there was any possibility of subsidence he would have raised that in some way. 

It's a long time since we bought a house, but a Homebuyer's Report in those days was basically a reassurance for the mortgage lender that the property value was higher than the amount being borrowed.  It was not an in depth survey of the state of the property.

davidmcn

TELLIT01 said:

Hama4075 said:

I thought using a surveyor to do a Homebuyer's Report was due diligence, and that if there was any possibility of subsidence he would have raised that in some way. 

It's a long time since we bought a house, but a Homebuyer's Report in those days was basically a reassurance for the mortgage lender that the property value was higher than the amount being borrowed.

I think you're talking about the next step down in survey formats i.e. a mortgage valuation. Homebuyer's Report is the usual "proper" survey that buyers would get, it's rare for anything more in-depth to be done (unless there's something specific warranting further attention).

TELLIT01

davidmcn said:

TELLIT01 said:

Hama4075 said:

I thought using a surveyor to do a Homebuyer's Report was due diligence, and that if there was any possibility of subsidence he would have raised that in some way. 

It's a long time since we bought a house, but a Homebuyer's Report in those days was basically a reassurance for the mortgage lender that the property value was higher than the amount being borrowed.

I think you're talking about the next step down in survey formats i.e. a mortgage valuation. Homebuyer's Report is the usual "proper" survey that buyers would get, it's rare for anything more in-depth to be done (unless there's something specific warranting further attention).

Thanks for that.  You may well be right.  As I said, it's a long time since we bought.

dunstonh

Basically you have:

mortgage valuation - basic report, often no visit made.  Will mention very obvious things only but no real use

homebuyers report - a half way house between a survey and a valuation.   However, having seen a number of people get these over the years, I would call them a waste of time.  They do very little inspection and have lots of "protect backside" potential issues.  Many I have seen mention Japanese knotweed may be present when it isnt for example.  The word "may" appears a lot.

Survey - this is a full report of the property. It will be more in depth looking at rot, worm subsidence,movement etc.  Not as expensive as many people would expect but too few people actually buy it.

Structural survey - this focuses on the structure side and may be limited to a particular area.  Often it's a follow on report to something highlighted in a survey.