Upheld: unreasonable claim rejection based on gradual damage exclusion complaint against HCC International Insurance Company Plc

Decision detail

Summary

Mr and Mrs W claimed for kitchen floor damage caused by a washing machine leak at their rental property. HCC declined the claim based on a gradual damage exclusion, relying on a loss adjuster's finding that the damage showed long-term exposure to moisture. The ombudsman upheld the complaint, finding that while the damage was indeed gradual, Mr and Mrs W were unaware of it occurring before October 2024 and therefore could not have prevented it. Although other signs of water damage would likely have been visible by September 2024, the floor damage would have already occurred by then, making repairs necessary regardless. The ombudsman required HCC to reimburse the repair costs with interest and pay £250 compensation for distress and inconvenience.

The Ombudsman's reasoning

The ombudsman applied the FCA principle that insurers must not unreasonably reject claims. While the policy excludes gradual damage, the ombudsman considered whether the insured should have been aware of the damage occurring. The key finding was that Mr and Mrs W were not aware of the gradual damage to the flooring beneath the lino before October 2024, and therefore could not have prevented it. Although other signs of water damage (plinth, sink area, lounge/dining flooring) would likely have been noticeable by September 2024, by that time the floor damage would have already occurred and repairs would have been necessary regardless. The ombudsman concluded that HCC had not been prejudiced by any delay, as the damage was already done before it became visible. Therefore, it was fair and reasonable to require HCC to accept the claim despite the gradual damage exclusion.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website