Partially upheld: claim rejection and unjustified premium increase complaint against Zurich Insurance Company Limited

Decision detail

Summary

Mr C and Miss C claimed under their residential property owners insurance policy for damage to an underground water pipe that was leaking. Zurich declined the claim on the basis that the damage was not caused by a specified insured event, noting that accidental damage cover was not included in their policy. Zurich also increased the renewal premium after the claim was made. The ombudsman found that Zurich's decision to decline the claim was reasonable because the insured persons had not established a potentially valid claim and the policy did not cover the damage under any listed insured peril. However, the ombudsman upheld the complaint regarding the premium increase because Zurich failed to provide evidence justifying the increase and was required to do so as the party setting the renewal price. The ombudsman ordered Zurich to refund the difference between the original and revised premiums plus interest.

The Ombudsman's reasoning

The ombudsman found that Zurich reasonably declined the claim because the insured persons must first establish they may have a valid claim before an insurer is expected to investigate. The water pipe damage was not caused by any listed insured peril (the 'Water Damage' peril covers escape of water from installations, not damage to the pipe itself), and accidental damage cover was not included in the policy. However, Zurich failed to provide evidence justifying the renewal premium increase, which was Zurich's responsibility as the insurer setting the contract price. The ombudsman rejected the argument that Zurich was bound by the original renewal invitation, finding that the risk had changed due to the claim before renewal occurred, entitling Zurich to revise its offer, but only if the increase was justified.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website