This month Paul Robertson explores the difference between an insurance claim and maintenance with an extract from his book which looks at two examples.
The theme this month is maintenance which is something insurance policies do not normally provide cover for. To explore the difference between an insured event and maintenance I have chosen to reproduce a few edited extracts from my book – Robertson’s insurance principles for leasehold flats that may be of interest. In chapter seventeen I comment:
What won’t be covered
Most insurance policies for blocks of flats are written on what is commonly described as an ‘all risks’ basis. However, that term may be slightly misleading as there are some things that will not be covered by the block of flats policy.
Essentially, an insurance policy is designed to cover fortuitous losses, or in other words a loss that cannot be foreseen or expected and occurs suddenly. So insurance policies contain a number of exclusions to the cover they provide.
Most significant is the exclusion of wear and tear and ‘gradually operating causes’. This is to prevent the insurance policy from effectively becoming a maintenance policy – something it is clearly not intended to be. In practice however, the distinction between wear and tear and gradually operating causes can become a grey area. So let’s look at a few common examples:
Pipe dreams
A pipe corrodes and starts to leak. While the insurance policy will not pay for the repair of the pipe, the insurance policy will normally cover the cost of the resultant damage. This is because the gradual deterioration of the pipe is a maintenance issue which can be foreseen (all pipes will eventually corrode) but the resulting damage caused is sudden and its extent cannot be foreseen. Therefore it is an insurable risk. Most block of flats policies will also include trace and access cover to locate the leaking pipe. It is important to understand the principle, as this explains why insurers will pay significant claims for water damage but not the seemingly small bill from the plumber to repair the pipe.
Any port in a storm
A storm causes part of the roof to blow away. Again another common claim and insurers have to understand the difference between wear and tear and actual damage by storm.
To achieve this they will check local weather records and expect to see wind speeds in excess of 56 mile per hour, which are the accepted definition of storm. In the absence of high winds at the time of the loss they are likely to conclude that the roof has simply exceeded its service life.
Insurance policies also typically exclude certain things such as rising damp, dry rot and damage by vermin, all of which are considered maintenance items.
Design defects and failure of materials are also common exclusions as they are considered likely to be early defects that would be the responsibility of the builders.
Under the general exclusions of the policy you can expect to see that war is excluded, as a ‘fundamental risk’ (see Chapter 3 on insurance principles) as are certain computer related events such as cyber and date-related failures (the latter being a remaining legacy of the potential problems with computers coping with the year 2000.) Terrorism is also excluded unless purchased back.
If you want to understand the subject better then you may wish to consider reading my book – Robertson’s insurance principles for leasehold flats. It is now in print and available to order at www.1stsureflats.com/book-release
Paul Robertson, Managing Director
1st Sure Flats and Midway Insurance / Email: [email protected] / Tel: 0345 370 2848 / www.1stsureflats.com.
