Insurance disputes involving subsidence

Disputes involving subsidence - and the damage it can cause - are among the most technically challenging of all the insurance cases. Here, are outlined the main reasons for this. We have also provide a selection of case studies illustrating the approach taken by the Financial Ombudsman Service (FOS) in dealing with some of the main types of subsidence disputes:
Typically, insurers take longer to settle subsidence claims than they do to settle any other type of claim made under buildings policies. A significant reason for this is that, with subsidence claims, identifying the nature of the damage and its cause is far from the end of the investigation. In many ways, it is only the beginning.

Even once the insurer is satisfied that subsidence caused the damage in question, it must then look carefully into how best to resolve the situation. Determining this can, in itself, be a lengthy process and will depend on a number of variables. These include:

• the make-up of the soil underlying the foundations
• the consistency of that make-up
• the nature of the foundations
• the trigger(s) for the movement and (once the situation is clear) the options for repair.

Part of the process may involve a period of "waiting time" while the pattern and rate of movement is monitored. Unless this has been explained, policyholders may become impatient with what appears - to them - to be unwarranted delay on the insurers' part.

In quite a large proportion of the subsidence disputes referred to the FOS, the policyholder complains of delay by the insurer in dealing with a claim. The FOS approach involves investigating whether the insurer took a reasonable and proportionate time to investigate and monitor the situation. If they consider there was an excessive delay before carrying out the necessary repairs, they look at whether the insurer was responsible for that delay.

Despite all the technical know-how that insurers, loss adjusters, loss assessors and other professionals devote to resolving the underlying situation, the need to maintain good communication with the policyholders can sometimes be overlooked. Communication has definitely improved over the years, but it's still not unknown for policyholders to be left very much "in the dark" about what is (or isn't) happening with their claim - and why.

Almost invariably, insurers will need to obtain reports from specialist claims handlers and building surveyors/engineers. And it is not unusual for policyholders to commission their own reports. Progress can stall if differences of opinion then arise, as they often do, between the specialists reporting to the policyholders and those commissioned by the insurers. For policyholders, understandably anxious to halt the damage to their homes - and possibly already putting up with a considerable degree of inconvenience - the prospect of apparently-unending debate among the experts can often be the final straw.

Dealing with subsidence disputes can be a necessarily complex and lengthy business - for the FOS as well as for insurers. It is often found that, on average, these cases take longer to resolve than any other type of insurance complaint. The challenges often involve parties with exceptionally entrenched positions, a variety of technical (and often discordant) opinions, and voluminous correspondence, sometimes stretching back years.
The rate of rate progress by the FOS in handling such cases will inevitably be affected by the timeliness of others, especially if there is a need for further expert evidence. And with some complaints they may need to await the outcome of on going monitoring programmes before proceeding very far.

Settling subsidence disputes sometimes involves applying basic principles that have been overlooked along the way. The most basic, of course, is "what is subsidence-" To insiders, the answer is usually obvious, but all that most home owners know about subsidence is that they don't want it. And subsidence is rarely defined in policies.

Insurers sometimes turn down a claim on the grounds that the damage was not caused by subsidence but by 'settlement' movement - such as the compression of soil under the weight of a recently-constructed building. It is the view of the FOS that, unless the policy provides a clear definition of subsidence, the term may reasonably be taken to mean any downwards movement of soil. So unless a policy expressly excludes damage caused by settlement, the FOS considers that any damage caused by downwards movement of soil should be regarded - and covered - as subsidence damage.

Complications can arise if the policyholder changed insurers around the time when - as later becomes evident - subsidence movement and damage was already occurring (possibly without the policyholder's knowledge). In these circumstances the FOS will take account of the ABI (Association of British Insurers) Domestic Subsidence Agreement. This says that one of the two insurers should deal with the claim, even if it includes damage that occurred during the other's period of insurance.
The lesson the policy holders can take away from this article is that in cases of all but the slightest damage suspected to be caused by subsidence, the home owner should always seek the assistance of a professional, independent claims handler working on their behalf and looking after their best interest.