House fire couple's insurance battle over 'occupancy'
Not living full-time in your home can invalidate your insurance, as one couple found out when fire devastated their property during renovation work.
Carpenter Andrew Hill and his girlfriend Chaska Gaines bought a bungalow in Glastonbury for £138,000. It needed modernisation and for 12 months they spent all their free time working on it.
But on 9 April 2011, two weeks before they were due to move in, a neighbour's home caught fire which quickly spread to Andrew and Chaska's house.
"Within 20 minutes, half an hour, it was ripping through our roof," said Chaska. "I just couldn't believe what I was seeing. I felt sick, gutted."
Despite their loss, the couple were comforted that they had taken out home protection and buildings insurance in addition to their mortgage.
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"Everyone kept reassuring us," said Andrew. "Don't worry, you're insured, it's going to be tough for a few months."
The couple claimed on their policy, which was organised by Countrywide and underwritten by global insurance giant Axa Insurance.
But the insurance company rejected the claim on the grounds that the house was not permanently lived in during the renovation.
"They said if we'd known what your plans were we'd have never insured you," said Andrew.
Axa's policy defines "unoccupied" as "not permanently lived in by you or by a person authorised by you for more than 60 consecutive days."
Andrew thought because he was at the house every day and the occasional night he was occupying it.
"Every single morning, evening, the door was open to that property," said Andrew. "I never left the property for more than 30 days - even two days because I wanted to keep on battling through to get finished to move in."
But there is no standard industry definition of "occupied."
"We'd been quite open, explained our situation on numerous occasions," said Andrew's dad Paul.
"[We were] completely shocked by the way it's turned out all because of the word 'occupancy, unoccupancy', I can't get it out my head, those two words and how we're in a battle now, trying to prove it."
Andrew insisted that when he bought the policy at Countrywide - who had also arranged his mortgage - he had explained in detail exactly what he would be doing at the house and how often he would be there. Paul, who was also at the meeting with the broker, confirmed this.
"There is absolutely no doubt in my mind that the mortgage consultant knew exactly what our plans were," said Paul.
"We told her we would not be living there, we were doing modernisation works and when all the works were complete Andrew would be moving in."
Home insurance complaints
- Complaints about buildings and contents insurance have risen steeply in recent years with the Financial Ombudsman Service (FOS) upholding about half of the 6,645 complaints last year in favour of the consumer.
- A significant proportion of the complaints are related to claims. In some cases, poor investigations were carried out by insurers or claims were rejected on "gut instinct" rather than as a result of evidence.
- Poor weather has also been a significant factor in complaints about home insurance following a few particularly bad winters.
The BBC spoke to Axa about Andrew's situation. They reiterated that his claim was rejected because the house was not permanently occupied - a fact they only knew about after they fire. They added that if they had been aware of it at the time of the purchase, they would not have provided cover.
Axa also said it was Countrywide's responsibility "to only sell policies to customers that meet the criteria".
Countrywide said that while they are "committed to providing excellent products and services to customers," they "do not comment on the detail of individual cases".
Financial Service Authority (FSA) guidelines require anyone selling insurance to keep careful notes of meetings, so if there is a later dispute over exactly what was said, the notes can help settle it. But Countrywide had failed to produce any such records for their meeting with Andrew.
He decided to take his case to the Financial Ombudsman Service (FOS), but they decided that there was no evidence to suggest the policy had been mis-sold and the Ombudsman's initial response was to say that they were not inclined to uphold his complaint.
In July 2012, the FOS reviewed the case and upheld Andrew's complaint against Countrywide concluding the policy was missold.
Responding to the decision Countrywide said they were reviewing the case with no guarantee they would accept the new ruling.
Andrew and Chaska still faced losing the entire value of their home.
A while later, Axa rang Andrew with a change of heart.
They said that after reviewing the case in more detail, they understood Andrew had answered all of the application questions honestly and he should not be disadvantaged as a result of a miscommunication between them and Countrywide. They added they would pay the claim in full and provide compensation.
"It was like wining a lottery ticket," said Andrew.
"Our lives have been on hold for the past 18 months or so," said Chaska. "You know, finally we can look to the future."
BBC TV's consumer programme, Rip Off Britain asked the Financial Services Authority (FSA) to outline the rules regulating the interaction between an insurance broker and a consumer.
Whose responsibility is it to ensure that all terminology is fully understood?
All FSA-regulated financial firms have a responsibility to ensure their customers can understand the features of the product they are buying (such as an insurance policy, or a mortgage). They must do this in a way that is "clear, fair and not misleading".
Is the emphasis on the consumer to ensure that the policy is suitable for them?
It depends. If a broker is recommending a policy, then the broker is responsible for checking if it is suitable. Nonetheless the final decision is still the customer's.
If the broker presents a range of options and explains the differences, but does not make a recommendation, then the customer takes responsibility for suitability. But firms should take reasonable steps to ensure that a customer only buys a policy under which he or she is eligible to claim benefits.
In other words, firms should not sell policies to customers when they know that these customers could not claim on them.
If you are not clear in regard to terminology or the policy details who can you seek advice from?
All FSA-regulated financial firms have a responsibility to ensure they communicate in a way that is clear fair and not misleading.
If a customer does not understand what they are buying, the seller should be able to explain comprehensibly how the policy works and what the different terms mean.
Additionally, the government's Money Advice Service website sets out information on various financial products and how they work.
If you feel you have been mis-sold a policy who can you complain to?
In the first instance, complaints should always be lodged with the firm providing the service or selling the product. If you are unhappy with the response of the firm, the Financial Ombudsman Service may be able to assist.
What steps can you take to ensure an accurate record of your discussion is taken?
All FSA-regulated financial firms have a responsibility to make and retain adequate records of transactions with customers. Specifically, firms should bear in mind the need to deal with requests for information from the FSA as well as queries and complaints from customers which may require evidence of matters such as: the reasons for personal recommendations, what documentation has been provided to a customer and how claims have been settled and why.
Customers are not responsible for retaining such records, but if they want to ensure the firm has taken an accurate record of their discussion, they may wish to ask the firm to confirm the discussion in writing, or write to the firm themselves, as a record.
Firms are required to provide customers with a statement of demands and needs before the conclusion of a contract. Customers should check this and let firms know if any of it is inaccurate.
Rip Off Britain will be broadcast on BBC One on weekday mornings at 09:15 BST from Monday 3 September 2012 and continues for four weeks