DRN-6273484

The complaint G, a limited company, complains Covea Insurance plc hasn’t handled an escape of water claim against a residential property owners insurance policy fairly. G is represented by Mr K, a director. References to Covea include the actions of its agents. What happened I issued a provisional decision. I said: “I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Mr K says G isn’t a business as it was set up to own the freehold of the property, which contains his flat and one other. But as a limited company G is a commercial customer with a commercial contract – not a consumer contract – with Covea. This matters for reasons I will come on to. G had a residential property owners insurance policy with Covea. In 2023 there was a claim against the policy following an escape of water. Covea accepted the claim. Mr K is dissatisfied with Covea’s handling of the claim for a variety of reasons. I have considered matters up to Covea’s final response letter dated 20 March 2025. Underinsurance Covea has settled the claim on a proportional basis as it says G’s sum insured was £534,821 when a fair estimate would have been £692,849. Its settlement is based on the difference in premiums, which is 83.45%. Mr K argues this is unfair because he thought G would be covered up to the sum insured, so if the cost of the claim was more than that, he would get up to the sum insured. As G is a limited company with a commercial policy, the Insurance Act 2015 (“the Act”) is relevant to this complaint. It imposes a duty on the insured to make a fair presentation of the risk. If an insured fails to make a fair presentation of the risk, there are remedies available to the insurer. The policy was taken out through a broker acting on G’s behalf. Covea therefore isn’t responsible for the sale and didn’t offer any information or advice. The October 2022 policy schedule sets out the Sum Insured as £534,821. Neither the schedule nor the policy wording defines ‘Sum Insured’. But on page 32 of the policy wording under the ‘Section A – Buildings’ it says: “As long as the loss or damage is covered under your Policy, we will decide whether to settle a claim by either rebuilding, repairing or replacing or by making a payment in respect of the damaged part of the buildings provided that:

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1. Immediately before the incident giving rise to the loss or damage: (a) the buildings were in a good state of repair and properly maintained; (b) the sum insured shown on your schedule was sufficient to allow for the full cost of rebuilding the buildings in a new condition similar in size, form and style, including the professional fees and additional costs as set in Section A – Buildings, paragraph 15 Additional Costs. If you do not comply with either of the above we may choose to reduce your claim in direct proportion to the amount of underinsurance, make a deduction for wear and tear, refuse to pay your claim and/or cancel the Policy.” Covea doesn’t have access to the system brokers use to source policies from the market, but it understands the guidance the system provides is down the following lines: “The Building Sum Insured should allow for: - The total cost of rebuilding the property with the use of existing construction materials including any outbuildings, walls, fences, gates, landlords fixtures & fittings, underground pipes and cables. - Professional fees - Debris removal costs” So, I’m satisfied Covea based its decision to provide cover and on what terms on the sum insured provided to it, which should be enough to rebuild the property. Mr K has said: “The policy was sold through a broker. The broker went to market and came to me with quotes from a variety of companies. I believe they used an index- linked uprating of the rebuilding cost. There was no specific discussion about underinsurance. It's obviously the case that if you insure a property for £500,000 and it costs £1,000,000 to repair, the full amount will not be covered - but my understanding was always that if I was insured up to a particular value, that would be the value that would be covered.” Mr K’s comments make clear there was no material discussion regarding the sum insured with the broker, or that he understood it’s function/importance. Nor has Mr K provided any details of what sum was index-linked or how/when that sum originated. I’m not persuaded G took reasonable care or made reasonable enquires to ensure it provided a fair presentation of the risk to Covea. The insured property is a three-storey semi-detached house split into two flats, built in circa 1930s, constructed of brick and timber under a pitch tiled roof. Covea has provided a detailed calculation based on October 2022 figures. This shows an estimate for the cost of rebuilding the property of £692,849. Mr K hasn’t challenged Covea’s estimate. So, I find Covea’s estimate likely what G would have provided had it made a fair presentation of the risk. The remedy available to Covea in these circumstances is to settle the claim proportionally. It’s done this based on the difference in premium, rather than the difference in sum insured. This is to G’s benefit as it allows for a higher claim

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settlement. So, I’m satisfied Covea’s proportional settlement at 83.45% is fair and reasonable. It follows I’m not requiring it to pay the claim in full. The claim The escape of water happened in August 2023 and was from an underfloor heating system. When Covea attended in early October 2023 the leak was still ongoing. Covea noted the following: “This has resulted in water damage to the utility rooms floor tiles, skirting, door, hallway floor tiles, kitchen/living room’s floor tiles and skirting. The floor tiles run underneath the kitchen units which will require to be removed and refit to facilitate the flooring replacement.” Trace and access was agreed (and later paid for by Covea) and I understand the leak was fixed towards the end of October 2023. I can’t see anything material happened in November 2023 but in December 2023 Mr K was asked to provide two repair quotes. I understand Mr K may have preferred for Covea to arrange the repairs, but as the policy allows it to decide how to settle the claim, and there was no compelling reason G couldn’t arrange them itself, I can’t fairly conclude asking G to do so was unreasonable. Mr K submitted two quotes in March 2024 and Covea arranged another visit to review and validate the costs, which happened in April 2024. I find that was fair and reasonable because the quotes were higher than Covea was expecting and it was entitled to review and validate costs to ensure they were reasonable and loss related. Repair costs were agreed at £36,854 + VAT in June 2024, after much chasing from Mr K. In August 2024 the repairs started, Mr K’s household was placed in alternative accommodation (“AA”) and storage was agreed. By September 2024 the removal of flooring had identified more water than expected and further damage. There was a dispute over whether some of the further damage identified was loss- related, because of a lack of action/advice by Covea, pre-existing, caused by G’s builders or because of a lack of mitigation. But drying equipment was installed, AA extended to account for the additional repair time, and quotes sought for the additional repairs required. In November 2024 a quote for the additional repairs was received and reviewed. This was for £33,288. I understand Covea agreed to pay £24,000 of this, which was reduced proportionally to £20,028. Covea has said it didn’t pay the full quote because some costs were overstated and there was some duplication of the repairs already agreed. I find that was a reasonable position. I say this because Covea’s position is justified. For example, the original repair quote included some repairs to walls. The further repair quote doesn’t appear to reflect this, and includes work related to walls at £15,400 + VAT. Covea has shown, with a detailed and reasoned breakdown (which the further repair quote doesn’t have), a cost of about £7,500 was reasonable. Covea considers G’s builder damaged the tanking to the property and has therefore declined to pay to repair it. Mr K argues there isn’t a problem with the tanking. Given Covea isn’t offering to repair the tanking and Mr K isn’t asking it to, I see no compelling reason to consider the tanking further.

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Mr K and his household moved back into the property in February 2025 and has confirmed all buildings repairs, AA and storage ended at that time, and no further costs have been incurred since. But there are a few matters outstanding, which I will consider in turn: - Mr K says the kitchen and kitchen appliances were damaged by the escape of water, or because of the escape of water. He’s provided photographs in support of this. The photographs show, in my view, wear and tear and physical damage, for example an upper corner of a draw/cabinet door ripped off. But in any case, I can’t see damage to the kitchen formed part of this complaint and in response to this complaint Covea has agreed to consider the damage further now. I find that’s fair and reasonable. - Mr K argues the claim costs are higher than they should have been, and this has impacted G’s premium. I understand Mr K’s argument, and he’s provided some specific examples of where he finds savings could have been made. But no claim of this nature is straightforward, and the benefit of hindsight must be set aside. In any case, even if I were to determine claims costs should have been less, there is no accurate way to calculate the impact because G moved to a different insurer and a large escape of water claim is accurate regardless of the specific claim cost figure. - Mr K says Covea falsely increased his premium by adding cover for communal contents which wasn’t needed. It was for G to choose what cover it needed and check what cover it received. So, I don’t find Covea erred here. Mr K may want to query it with his broker, and if he can prove Covea wasn’t on risk at all for ‘Landlords Contents’ (i.e. there is no communal contents, such as carpets in a communal landing) he could query it with Covea too. Overall, from the evidence available to me, I don’t find there is a fair and reasonable basis for me to require Covea to make any further claim-related payments to G. Compensation Mr K is dissatisfied with the way the claim has been handled. I can understand why. There were some avoidable delays, communication wasn’t as timely or clear as it should have been on occasion and finding out about the underinsurance position so far into the claim would have come as a very unwelcome shock. But my powers only allow me to make an award for non-financial loss such as pain and suffering, damage to reputation or distress or inconvenience to an eligible complainant. The only eligible complaint is G, a limited company. The claim hasn’t caused G, a legal entity rather than a person, any of these. It follows I make no compensation award to G. My provisional decision While I sympathise with Mr K, I don’t intend to uphold G’s complaint.” Covea didn’t provide any further evidence or arguments for me to consider. Mr K responded to disagree with my provisional decision and provided his reasons in detail. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and

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reasonable in the circumstances of this complaint. Mr K challenges whether the broker was acting on G’s behalf and says policy information wasn’t provided. As Mr K says the broker went to market and came to him with quotes from a variety of companies, I cannot fairly conclude the broker was acting for the insurer rather than G. Covea therefore isn’t responsible for the sale and didn’t offer any information or advice. If Mr K has concerns with the sale, he’ll need to take that up with G’s broker. Mr K has said G did make a fair presentation of the risk because a policy was taken out in 2017/2018 with a sum insured of £400,000, which increased year on year to £534,821 in 2022/2023. He says this was to protect G against underinsurance. But there is no evidence to show £400,000 was a fair estimate in 2017/2018, or that the increases were adequate. And index linking becomes less reliable as time passes. Mr K has challenged Covea’s sum insured. He says he didn’t do this initially because he thought G’s broker would do that, he wasn’t provided with Covea’s breakdown to challenge it, and he thought any figure he produced would be dismissed. Mr K’s main argument is Covea has based its calculation on it being a three-storey building, whereas he says it’s a two-story, with a two-storey extension at the rear. Mr K has demonstrated this with floor plans; a garden level, a street level and a first-floor flat level. To me, that’s three levels (three storeys). I’ve compared Covea’s estimate to Mr K’s floor plans and there do seem to be some differences. But the number and type of rooms seem to be comparable, and Covea’s estimate is based on area rather than layout. I’m not satisfied G has shown Covea’s estimate is unreasonable. Mr K has explained why he considers Covea should pay more towards repairs for the further damage identified in September 2024. He’s explained why he doesn’t consider there to have been a duplication of work across quotes and why he considers G’s costs were reasonable. But he hasn’t demonstrated this through evidence, or qualified what further amounts he considers should be due. It follows I see no reason to require Covea to pay G more. Mr K has said the damage to his kitchen isn’t wear and tear and has provided more photographs. I’m still not satisfied that all the damage Mr K refers to is directly related to the escape of water. But as I set out in my provisional decision, Covea has agreed to further consider the damage now and I remain of the view that’s a fair and reasonable next step. Mr K says the contents insurance limit G didn’t need should be allocated to the buildings sum insured. As I set out in my provisional decision, this position isn’t the result of an error on the part of Covea. While part of the same overall policy, the buildings cover and the contents cover were separate elements, based on different risks, and priced separately, as can be seen from G’s schedule. There is no basis for me to require Covea to use a limit from one element to subsidise another. My final decision I remain sympathetic to Mr K’s circumstances, but I don’t uphold G’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask G to accept or reject my decision before 21 May 2026. James Langford Ombudsman

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