Subsidence claim

Hi, I wonder if anyone can advise please, 
my elderly mother owns a property which she inherited from her mother - the property is only used as a holiday home as it’s on the other side of the country to where she lives. Around six years ago when changing the door spec to match with the insurance it was noticed that the property was suffering subsidence and a claim was made. The insurance company appointed a loss adjuster to handle the claim. At first they used the “Average Clause” to barter my mother into meeting a third of the cost of repairs. I felt it was unfair and after 18months of legal haggling the insurance company agreed it was indeed unfair and withdrew the use of the clause. Next they put to tender the work to be carried out to 5 companies - they choose 1 and we then began agreeing finishing etc but a sticking point was they kept asking my mother for a cheque to be paid directly to the contractor (her excess) I was feeling she would then be in some kind of contract with the contractor and would have to chase up on any problems - which my trusting mum at 85 would struggle with I felt. My mum was never in a position where she had all the info and was being bullied for the cheque - so on her behalf I said they’d be no cheque until we had everything in writing of what was to take place - the sticking point was a rear kitchen extension - which the loss adjuster said would be demolished and rebuilt on a like for like basis - but would not be tied to dimensions, materials, any kind of plan.

six months has passed it’s now around six years from the start - they have stone walked my mum. On chasing them up through the insurance company they have now offered my mum £45k to complete the works herself plus vat - what should she do?
there’s no way she can oversee such a project - surely they have a duty of care?
will she have to pay tax on their payment to her? I don’t feel £45k is enough to meet the cost of repairs which have got worse over the last six years of doing nothing. On top of everything else - whilst the have been delaying proceeding with the claim she’s had all her liabilities - elec gas water insurance etc etc and the house needs a lot of work internally and externally - which she’s been unable to see to because the house is not useable - not to live in, not to sell, not to rent or even go on holiday to.

thank you for taking the time to help my mum 😊
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Comments

  • Sandtree
    Sandtree Posts: 10,628
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    Insurance payments are not income so not taxable 

    Averaging was a standard clause for people who have under declared the value of their property, though how it stands up against the The Consumer Insurance Disclosure and Representations (CIDRA) Act 2012 which say the settlement should be proportionally reduced by the premium difference rather than the limit difference I've not seen FOS rulings.

    The policybook will state how they have to settle the claim, in most cases cash is an acceptable method and is not uncommon in building claims where insurers do not have national networks of builders on their books to get corporate rates from. Ultimately however if she isnt happy she needs to register a complaint and escalate to the Ombudsman if she isnt happy with their response. 

    For the size of the project the settlement should consider the cost of a main contractor/project manager as appropriate.
  • Annemos
    Annemos Posts: 705
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    1) I have had a Subsidence claim and I also did not want to pay a Builder a thousand pounds (excess) when I have never used them and cannot vouch for their work. I also felt that my contract was with the Insurance Company anyway and not with some builders I had never heard of.

    I raised this issue and I was allowed to pay the 1000 pounds via the Claims Handling Company itself. 

    So, it was like a payment in reverse. If they needed to pay me something, they were using an account. So I believe that I paid my 1000 pounds into that account, going the other way. 

    I was happy with that, as it kept me at arms length from the Contractor at that stage. 

    Can you ask if you could do that, perhaps? 


    2) The other thing that bothers me is this. The Ombudsman says in their cases that there is an Industry-wide agreement that the Insurance Company should provide "ongoing Insurance Cover" IF the Subsidence repairs were done by that same Insurance Company. 

    (If the repairs were not done by the Insurance Company's contractors. then they do not have to honour this.)

    This has been put in place, because there is a recognition that getting ongoing Insurance after Subsidence is much more difficult. So my feeling has always been that we need to stay with the same Insurer after Subsidence has happened. So this implies using THEIR contractors to do the repairs. 

    I do not know if Sandtree has an opinion on this, but I am not so sure that the Insurance Company should be putting you in the position of having to use your own Contractors, if it is against your will. (Considering this "ongoing insurance cover" issue. You would be putting at risk your ongoing Insurance Cover.)

    3) There is also the problem that if they are your own Contractors..... YOU are totally responsible if anything goes wrong. 


  • Annemos
    Annemos Posts: 705
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    https://www.abi.org.uk/products-and-issues/choosing-the-right-insurance/home-insurance/subsidence/how-subsidence-can-affect-your-home/

    Association British Insurers says this......



    Subsidence claims can be very expensive, so certainly could affect the cost of future property insurance, and the level of any policy excess. An insurer will need to assess the risk, but ABI member companies are committed to working with policyholders to manage any subsidence risk and maintain cover. 

    Where a claim arises, the insurer handling the claim will, in the majority of cases, continue to provide subsidence cover on the property after the repair is completed, as long the repair has been carried out under their direction, or with their approval.

    However, there may be circumstances where continuation of cover is not possible in which case you should shop around to find alternative cover and consider using a specialist broker (see Useful addresses).

  • Annemos
    Annemos Posts: 705
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    https://www.financial-ombudsman.org.uk/businesses/complaints-deal/insurance/home-buildings-insurance/settling-home-insurance-claims

    This says:  

    We’ll check the policy wording that applied at the time the damage occurred and consider what impact that has on the way claims can be settled. In most policies you’ll include a term explaining how you settle claims like: ‘we will decide whether to repair, replace, pay cash or reinstate the damaged part of the building’.

    This means you can choose how to go about settling the claim. However, we’d expect you to take into account the specific circumstances of each particular customer and what’s reasonable for them.

    For example, we might think that deciding to pay cash to settle a subsidence claim which includes extensive structural work isn’t a fair choice for the insurer to make. But if the customer owns a construction company, this settlement might be viewed differently.

  • Sandtree
    Sandtree Posts: 10,628
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    Annemos said:
    2) The other thing that bothers me is this. The Ombudsman says in their cases that there is an Industry-wide agreement that the Insurance Company should provide "ongoing Insurance Cover" IF the Subsidence repairs were done by that same Insurance Company. 

    (If the repairs were not done by the Insurance Company's contractors. then they do not have to honour this.)

    This has been put in place, because there is a recognition that getting ongoing Insurance after Subsidence is much more difficult. So my feeling has always been that we need to stay with the same Insurer after Subsidence has happened. So this implies using THEIR contractors to do the repairs. 

    I do not know if Sandtree has an opinion on this, but I am not so sure that the Insurance Company should be putting you in the position of having to use your own Contractors, if it is against your will. (Considering this "ongoing insurance cover" issue. You would be putting at risk your ongoing Insurance Cover.)
    It is an ABI agreement and the ABI covers about 90% of UK based insurers but there are plenty of non-UK domiciled insurers writing UK business under passporting rules etc.

    The ABI agreement requires the repairs be done under the direction or with the approval of the insurer... it doesnt mean their own contractors have to do the work. In this particular case we don't know what work has already been done in the 6 years the claim has been going on... it could well be the subsidence issue has been fixed by the insurer's contractor and what remains is fixing the resultant damage.

    As already stipulated, the OPs route is to log a complaint. It is perfectly normal for excesses to be paid directly to the insurers contractors and over 6 years this may be one of many fights the insurer and insured may have had hence coming to the end of the tether and offering a cash settlement for the remainder. 
  • Annemos
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    The interesting thing about Case DRN2093738 is that it was about an Insurer who is not a member of the ABI. 

    So the Ombudsman still felt that they should treat the homeowner fairly re ongoing cover. 


    Regarding the repairs, you raise an interesting point. When Subsidence repairs are done and they need to be done under the direction of the Insurer or with their approval, just which repairs are being included in that? 

    I have always taken the position that the safest position for me to take as the homeowner is to assume that it means ALL the repairs. As they all go on the Certificate of Structural Adequacy that we need to obtain. 

    Also, just how easy is it to get a CSA, if the Insurance Company Contractors did not do the repairs?

    I do not like that the lines might become blurred if a non-Insurance Contractor is used at any stage. ("Oh no, we didn't approve of that!") 






  • Sandtree
    Sandtree Posts: 10,628
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    Annemos said:
    The interesting thing about Case DRN2093738 is that it was about an Insurer who is not a member of the ABI. 

    So the Ombudsman still felt that they should treat the homeowner fairly re ongoing cover. 
    It is an interesting case, though one point that wasnt clear to me was what premium should be charged for the reinstated cover... it states cover and premiums should be backdated. 
  • Annemos
    Annemos Posts: 705
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    reinstate subsidence cover from July 2014....... and charge the premium applicable for this cover from the date cover is reinstated;


    The Ombudsman's case is January 2016.

    I wonder if it means from January 2016 onwards, there will be a new annual policy issued and the cost of that new premium will be that which applies for a full policy to include Subsidence. 

    Then attached to that policy they also put a written endorsement to say that cover for Subsidence was always in effect from July 2014 to January 2016. That gives the homeowner no break in Subsidence Cover. So that is administrative. Homeowner can say there was no incidence of Subsidence cover ever having been declined.

    (When I lost mine for 5 months, I was told it was impossible to set up a policy which is backdated to 5 months before that. A policy can only be issued from today (or perhaps to start at a date in the near future.)

  • Sandtree
    Sandtree Posts: 10,628
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    Annemos said:
    (When I lost mine for 5 months, I was told it was impossible to set up a policy which is backdated to 5 months before that. A policy can only be issued from today (or perhaps to start at a date in the near future.)

    Asking an insurer to backdate a policy is the same as asking a bookie to take a bet after the race has already been run.

    In practice and reality it is done for various reasons, if you look at treaty reinsurance its often back dated to a quarter end or 1/1 if negotiations take longer than anticipated but given many are not a case of "will there be a loss" but "how big will the losses be" then its not as much of a problem (unless a major cat event has happened).

    There can be other issues that mean insurers arent keen to back date, take the MID, it requires all changes to be reported in X days of the effective date. Reinstate cover back a month and you;re in breach of the requirements. Do it enough and you can have sanctions or worst, be banned from writing UK Motor insurance and insurers will always want to be able to make some late reports for cancelling policies for fraud etc back to inception.
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