Correcting Statements of Fact on an existing insurance policy

theblindguest

I live in a terraced house which has been split into three flats. When my neighbours and I took out buildings insurance 6+ months ago, one of the questions in the Statement of Fact was - "Are you aware of any survey carried out on your home which mentions subsidence, settlement or movement of the buildings?", to which we answered no. This question is pertinent because our next door neighbour made a subsidence claim a few years ago, which we disclosed to our insurer. For this reason we have a slightly higher excess on subsidence claims than we would otherwise.

I had a survey done on my flat before I moved in 7 years ago which does in fact mention some distortion of the property due "initial settlement", but it goes on to say "This is of an historic nature and no repair is required". This section of the survey, titled Outside the property, uses the traffic light system and was graded green which indicates "No repair is currently needed. The property must be maintained in the normal way".

This was overlooked by me when we were taking out the buildings insurance as it's an old survey which essentially threw up no red flags when I was purchasing the flat, so it didn't even occur to me to read it. I naively assumed the survey that was carried out on one of the other flats 2 years ago would be more relevant. However, the insurers clearly want this information, and would probably use the fact it wasn't disclosed to them against us were we to make a claim (which we've currently no reason to).

I'm just curious if anyone else has been through something similar, where they've contacted their insurer to disclose information that they missed when applying for the policy, and what the outcome was.

Right now I feel like the response from the insurers could range from anything from "thanks for updating us, it doesn't make any material difference to the policy" to "we're cancelling the policy today, good luck".

Thanks in advance for any guidance.

DullGreyGuy

theblindguest said:
one of the questions in the Statement of Fact was - "Are you aware of any survey carried out on your home which mentions subsidence, settlement or movement of the buildings?"

The fact that they've mentioned "your home" is very odd for a block of flats, are you sure you are buying the correct kind of insurance?  It sounds like you've purchased regular home insurance which is designed to cover a single dwelling in a building not three independent dwellings occupying the same building. Ordinarily the freeholder would be buying Block Insurance for the building (which will never mention the word "home") and then each leaseholder/occupant will buy their own content (assuming you arent in Scotland)

Insurers react better to people calling them to say they've made a mistake than the insurer finding out for themselves however ultimately if it's something outside of their risk appetite it will result in the policy terminating early. Basic settlement impacts almost every building when its built so ordinarily its not an issue but then most repair the small cracks and so most surveys dont mention it. You also have the complexity of an attached building already having had a subsidence claim and sometimes these things are cumulative. 

theblindguest

DullGreyGuy said:

The fact that they've mentioned "your home" is very odd for a block of flats, are you sure you are buying the correct kind of insurance?  It sounds like you've purchased regular home insurance which is designed to cover a single dwelling in a building not three independent dwellings occupying the same building. Ordinarily the freeholder would be buying Block Insurance for the building (which will never mention the word "home") and then each leaseholder/occupant will buy their own content (assuming you arent in Scotland)

Thanks for the reply. Yes I'm quite sure we have the correct insurance. We purchased it via an insurance broker through the company we set up to manage the house, which is a share of freehold. We each also have home insurance for to cover our belongings etc.

Insurers react better to people calling them to say they've made a mistake than the insurer finding out for themselves however ultimately if it's something outside of their risk appetite it will result in the policy terminating early. Basic settlement impacts almost every building when its built so ordinarily its not an issue but then most repair the small cracks and so most surveys dont mention it. You also have the complexity of an attached building already having had a subsidence claim and sometimes these things are cumulative. 

I appreciate your balanced view. Having a policy terminated is obviously something we'd want to avoid at all costs as it's a red flag to other insurers, which leads to taking out a more bespoke policy, which is then a red flag to mortgage lenders. The difficult part of it all is that from a layperson's perspective it's impossible to know what the odds are of that happening... 5%? 50%? Who knows.

On a side note it seems kind of wild that you can plaster over small cracks (or even large ones if you're less scrupulous) that could point to a potential subsidence issue, and mislead a surveyor that way. As I understand it it's very difficult to diagnose a subsidence issue without the cosmetic damage in view - or at least it's a slow process involving measuring movement of a building over time.

Annemos

This is indeed a difficult situation. I will give you some things I have found, as you decide what to do.

I am not an Insurance Expert, but I had a Subsidence claim which threw up lots of issues. So I started to follow the things that can crop up.

I am sorry if it seems involved, but if it was me, I would like to have as much information as possible when deciding what to do. And, as I went along, I felt I could not miss out anything I had discovered below. 


(There is an extra issue in the first case below, which may be relevant in your scenario. The Ombudsman looked at whether CIDRA even applies, because this particular case DRN6206071 is concerning a Commercial Policy for a rented out inherited home. Should only the Insurance Act of 2015 apply? In this case, however, it essentially came down to the same thing.  I will continue to discuss your Post from the point of view of CIDRA, in case your scenario is deemed to be more like a "domestic consumer home" scenario.

https://www.legislation.gov.uk/ukpga/2015/4/section/8    is an extract from the Normal Insurance Act and.... 

https://www.legislation.gov.uk/ukpga/2015/4/schedule/1/paragraph/2  
https://www.legislation.gov.uk/ukpga/2015/4/schedule/1/paragraph/3
https://www.legislation.gov.uk/ukpga/2015/4/schedule/1/paragraph/4
https://www.legislation.gov.uk/ukpga/2015/4/schedule/1/paragraph/5     )



Anyway here goes with my findings! (Using CIDRA : The Consumer Insurance (Disclosure and Representations) Act 2012 )   

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First thing:   what should be done now you have realised there was a Misrepresentation: 

I just looked at my own Policy and it says the following:


Statement of Fact IMPORTANT - YOU SHOULD READ THIS DOCUMENT IN FULL:

The Statement of Fact should be read in conjunction with your Policy Schedule and Policy Wording. It’s important that you check these are correct. You must give, to the best of your knowledge, full and accurate answers to all of the questions that you are asked. If you are in any doubt as to whether we need to know any piece of information, please ask us straight away.

If there are any changes to any of the information you have given us in response to our questions after the policy commences, you must inform us immediately. Please note that any deliberate, or intentional failure to give full and accurate answers may result in your policy becoming invalid, claims settlements may be reduced or refused and you might not be entitled to a refund for the premium you paid.



Also see the CIDRA rules discussed in more detail later. These say at the start:    

Disclosure and representations before contract or variation

(1)This section makes provision about disclosure and representations by a consumer to an insurer before a consumer insurance contract is entered into or varied.

(2)It is the duty of the consumer to take reasonable care not to make a misrepresentation to the insurer.

(3) A failure by the consumer to comply with the insurer’s request to confirm or amend particulars previously given is capable of being a misrepresentation for the purposes of this Act (whether or not it could be apart from this subsection

https://www.legislation.gov.uk/ukpga/2012/6/crossheading/precontract-and-prevariation-information/enacted



So apparently, with my policy. They told me to inform them if the original information I gave them has changed. And if I did not tell them about this, I would fall straight into the CIDRA Rules for a Misrepresentation. (Discussed further in the next bit and within the two attached Ombudsman cases.)

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Secondly.  I have taken a look at some Ombudsman cases to try and get information if a homeowner has had a Survey done. And if also the "correct and clear question" has been asked of the homeowner when they took out the Policy.

In your case,  they did actually ask you the question about Settlement.

That is different to this case, where the Insurance Company had not actually asked that specific question. So the Ombudsman found in the favour of the Customer. 

Here is the case addressing Settlement. (And also the discussion about this one also being a Commercial Policy)

https://www.financial-ombudsman.org.uk/decision/DRN6206071.pdf


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https://www.financial-ombudsman.org.uk/decision/DRN-2906725.pdf


In this case, the Ombudsman seems to be going on the assumption that the Homeowner ought to have known what was in the Survey.   They did not disclose the related item from the Survey when asked the question, so they were found to have done a Misrepresentation. 

It then goes on to say this.....    I now need to consider if the misrepresentation was a qualifying one. To do this, I have to consider whether if Ms H and Mr T hadn’t made the misrepresentation, Admiral would have offered the same policy cover on the same terms.  And then it says that Admiral would not have offered a policy at all. So it is a Qualifying Representation. 

Under CIDRA a qualifying misrepresentation is either deliberate, reckless or careless. And the available remedy will depend on which one of these categories the misrepresentation falls into. It is for the insurer to prove that a misrepresentation is either deliberate or reckless. Otherwise it is considered careless. In this case Admiral has said it considers Ms H and Mr T’s misrepresentation to be careless. CIDRA says where a qualifying misrepresentation has occurred, and it is considered careless, then the insurer can refuse all claims, avoid the policy, but should refund the policy premiums.




This is where this comes from in the actual CIDRA Rules....   there are two types of "misbehaviour". Deliberate/Reckless      and      Careless. 

 2     If a qualifying misrepresentation was deliberate or reckless, the insurer—

(a) may avoid the contract and refuse all claims, and

(b) need not return any of the premiums paid, except to the extent (if any) that it would be unfair to the consumer to retain them.

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3  If the qualifying misrepresentation was careless, paragraphs 4 to 8 apply in relation to any claim. (See the link)

https://www.legislation.gov.uk/ukpga/2012/6/schedule/1/part/1/crossheading/careless-misrepresentationsclaims

See 5  (Careless)  If the insurer would not have entered into the consumer insurance contract on any terms, the insurer may avoid the contract and refuse all claims, but must return the premiums paid.

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So in your case, if CIDRA does apply and if your error is deemed Careless (rather than deliberate)....  and if the Insurer would not have offered you a Policy at all on any terms, had they known this from your survey, then they seem to be within their rights to Avoid the Contract and refuse all claims. (And refund the premiums if it was merely Careless, as opposed to Deliberate/Reckless.)


In these two cases above, the issue came to light when there was a Claim for Cracking (Subsidence)  and the Insurance Company asked for the Previous Survey.


(But see the case DRN-3746305   in my 3rd message below, where the Valuation Report at Purchase also came to light during an Escape of Water Claim.) 

Annemos

Just to add, if CIDRA does apply and your error was deemed to be Careless,  but they would have offered you a policy on different terms if they had known about this Survey.

They may then treat the contract like that if they require it.   From this:  

https://www.legislation.gov.uk/ukpga/2012/6/schedule/1/part/1/crossheading/careless-misrepresentationsclaims

It says one of the remedies is   ........... 

6    If the insurer would have entered into the consumer insurance contract, but on different terms (excluding terms relating to the premium), the contract is to be treated as if it had been entered into on those different terms if the insurer so requires.

Annemos

https://www.financial-ombudsman.org.uk/decision/DRN-3746305.pdf

This one, cracking was spotted during a claim for Escape of Water.     The Insurance Company was allowed to cancel this one's policy because the cracking must have been obvious when the policy was taken out.

There was also a big discussion about the Valuation Report for the Purchase, which was requested by both the Insurance Company and the Ombudsman. 


The Insurance Company was at first a bit lenient with this homeowner and had agreed not to put the cancellation on the Insurance Database. So the case ended like this:   

Therefore, in line with CIDRA, the remedy available to QIC is to cancel the policy from the start and refund Mr M’s premium. Helpfully, QIC has said it won’t record the policy cancellation on the insurance database, so Mr M shouldn’t be affected when seeking to buy insurance in the future.


(However on previous Postings on here:   DullGreyGuy has said, that depending how questions are asked in the future.....  if this Homeowner is ever asked if they have ever had a Policy cancelled then they would have to answer Yes.) 

Annemos

Final thoughts. 

You are deciding between 3 courses of action, I feel.

(DullGreyGuy is an Insurance Expert and may find fault in this analysis, but this is how I am viewing your possible choices.)


1     You do the correct thing and tell them about it straight away........

a)  They may decide they would not have offered you a policy at all, had they known about this.   You would be hoping that they might be lenient with you and say that this was a Careless error, so they will refund your premium. And as they cancel it, maybe they might be even more kind as you did volunteer it yourself... and not register the cancelation on their big database.  (But be careful to answer correctly if you are ever asked in the future if you had ever had a policy cancelled!) 

b ) If they would have offered you a Policy but under different terms then they can impose that. They might increase your Subsidence Excess for example?? Will you like the new Terms? 


2      If you keep quiet about it, then you are hoping they will not find out. Also you are running the risk that you might turn out to be the equivalent of uninsured, if you have any major incident like an actual Subsidence Claim or a Water Escape Claim.   (Anything where they might find out about this. Sometimes this is part of a look at whether the home is in a good state of repair, after a claim has been made.)

3      Another thought I have had. Can you just telephone and cancel the Policy yourself with no reason? (I am not clear if all your flats actually have independent Building Insurance Policies, or if they are all covered by the same Building Insurance Policy, which would make this option more difficult.)   I think you get a partial refund of premiums MINUS any penalty fees that are liable for in your Policy, if you have not had a claim on the Policy. (But this might result in you actually owing them something.)  This could be more expensive than Option 1, but does not have those "CIDRA-Insurer Terminated the Policy" risks which Option 1 has. 

https://www.moneysavingexpert.com/insurance/home-insurance/cancelling-insurance/

With this Idea Number 3 :   you are also going to have to face the issue now of that Survey mentioning Settlement when you look for a new Policy with another provider and answer their "Statement of Fact" questions correctly, but you are going to have to do that anyway at some point. 


Good luck. 

theblindguest

Thanks very much for taking the time to reply and for all the info Annemos.

I'm still digesting some of it but I think ultimately, to your last point about which course of action to take, it is definitely an option to cancel our existing policy and look find a new one. In this scenario we would either disclose the mention of settlement in the survey or omit it (not all insurers seem to ask this question). There is still the issue of overlap when making a subsidence claim to consider, where if you make a claim within a year of switching provider the cost of the repair is split between old and new insurer. Again - we have no subsidence repairs or claims to make but who knows what the next 12 months would have in store. I think this might end up being the path we will take, despite its own flavour of risk.

Thanks once again.

Annemos

Yes, here is that Agreement again


https://www.abi.org.uk/globalassets/files/subject/public/home-insurance/2017/abi-domestic-subsidence-claims-agreement-and-guidelines-december-2017.pdf

In Option 1. re the 8 weeks or less.  It allows for claimant to be pushed back to the Prior Insurer. 

(I have seen a recent case, where the homeowner claimed under the Current Insurer. The claim was thrown back to the Previous Insurer as it was within 8 weeks. But nobody bothered to inform the Homeowner that they should actually be seeking "Continuation of Cover" with the Previous Insurer who is handling the claim.)


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I don't quite know what this means:   (iv) Nothing in this Agreement shall prevent any Insurer from voiding a policy for fraud, non-disclosure or misrepresentation, or from relying otherwise on any policy term or condition except that late notification of the initial claim by the insured alone shall not prevent the operation of this Agreement. Where one Insurer specifically excludes all or part of the damage, this Agreement will apply only to that part of the damage covered by both Policies.


Does this mean... if your Current Insurer cannot decline the damage. But your Previous one can decline it. Then the Agreement does not come into effect for the damage and so the Current Insurer picks up the cost of all the damage?    (Perhaps that also involves a look at... did all the damage occur in the Current Insurance period?)


See also Question 7 answer, which also addresses a similar problem. This seems to imply that if the homeowner considered that the damage took place in the Current policy, then they might be able to request only the Current Insurer's handling of the costs?  

I suspect one would have to look at FOS cases to get any more information on these issues of differing policies. And how they would be applied. 


(PS In my own case, I was 6 months into the new policy and my place suddenly cracked in August 2018 in a big drought. I went away on holiday for 3 weeks and when I got back the corner had suddenly dropped: zig-zag cracking. And for a period of about 3 weeks, after I returned home, I could hear creaking, perhaps plaster work etc. It must have been seeking its new level. After the winter, the outside cracks had closed up again. Tree roots on Clay!)

Annemos

Perhaps something else: Take many photos of the current condition of your Building and when you next take out a new Policy. So you have proof.