Upheld: unfair claim settlement and claim handling complaint against UK Insurance Limited (UKI)

Decision detail

Summary

Mr T complained that UKI unfairly declined to repair subflooring and instead offered a cash-in-lieu settlement of approximately £32,000. An independent expert report had identified significant defects in flooring work previously carried out by UKI's appointed repairer, concluding full floor replacement was needed. UKI claimed it had no suitable local contractors available and offered cash settlement, but Mr T objected as the amount reflected contractor rates, excluded VAT and alternative accommodation, and left him at risk of further undiscovered damage. The ombudsman upheld the complaint, finding that once UKI had begun repairs it had entered into a repair contract and could not fairly switch to cash settlement, particularly given the defects were caused by UKI's own repairer. UKI was directed to appoint a suitable contractor to complete the outstanding works.

The Ombudsman's reasoning

Once an insurer has begun repairs, it has effectively entered into a repair contract and agreed to settle the claim on that basis. This gives the policyholder certainty and prevents the insurer from changing approach if difficulties or additional costs arise. Although UKI's policy terms allow it to choose how to settle a claim, it must do so fairly and reasonably. Given that UKI had already started repairs, the deficiencies were caused by UKI's own repairer, and Mr T had negative experience with that repairer, it was unfair for UKI to withdraw from completing the repairs and instead offer only a cash settlement. UKI should have explored appointing a contractor outside its usual panel or local area to put matters right.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website