Question 1

Excess in an Insurance Claim

Accepted Answer

Q: Recently our RMC had to renew a frequent argument, about who should pay the excess in an insurance claim, forwarded on behalf of our owner-lessee who owns a ground-floor flat. The cause was one of the commonest, a leak of water from a shower room of another flat above him. We saw articles in your newsletter before, in circa 2010, which said that the company was supposed to bear the insurance excess. So far we have followed this, and this time, have been intending to absorb the excess in the building fund, as we think our lease allows us to do so. But we want to review the process for two reasons. First, the excess for such a “wet incident” has increased drastically recently (now £500). The other owner-lessees of the same building started saying it was unfair to be charged for the problem not caused by any of them. Second, a book which we have read recently (Shulman, N., 2012, Being a Leaseholder, 2nd edition) indicates that (p90) we may be able to take steps so that the culprit flat may be called upon to pay the excess in a claim. Is it reasonable for us to charge the excess to the causer of the leak? FPRA Hon Consultant Belinda Thorpe replies: My understanding is that if the leak has come from a tank which is the sole responsibility of the leaseholder rather than from “communal pipework” there is nothing to stop the RMC from pursing the offending leaseholder on a civil basis for loss. Point 5c on page 8 states the leaseholder should not permit any act or thing which may render the insurance policy to be voidable or which may cause an increased premium, which I guess must have happened if the excess has increased so substantially too. This would give the RMC a breach of covenant should they choose to pursue a request to the leaseholder to take the necessary steps to mitigate future escapes of water from his demise, which would be the most appropriate thing to do to show their insurer that everything has been done to prevent leaks in the future. This in turn should help reduce the premium payable and excess applicable when these incidents occur. This is a difficult one as one needs to consider the practical implications as well as the financial.

Question 2

Excess in an Insurance Claim

Accepted Answer

Q: Recently our RMC had to renew a frequent argument, about who should pay the excess in an insurance claim, forwarded on behalf of our owner-lessee who owns a ground-floor flat. The cause was one of the commonest, a leak of water from a shower room of another flat above him. We saw articles in your newsletter before, in circa 2010, which said that the company was supposed to bear the insurance excess. So far we have followed this, and this time, have been intending to absorb the excess in the building fund, as we think our lease allows us to do so. But we want to review the process for two reasons. First, the excess for such a “wet incident” has increased drastically recently (now £500). The other owner-lessees of the same building started saying it was unfair to be charged for the problem not caused by any of them. Second, a book which we have read recently (Shulman, N., 2012, Being a Leaseholder, 2nd edition) indicates that (p90) we may be able to take steps so that the culprit flat may be called upon to pay the excess in a claim. Is it reasonable for us to charge the excess to the causer of the leak? FPRA Hon Consultant Belinda Thorpe replies: My understanding is that if the leak has come from a tank which is the sole responsibility of the leaseholder rather than from “communal pipework” there is nothing to stop the RMC from pursing the offending leaseholder on a civil basis for loss. Point 5c on page 8 states the leaseholder should not permit any act or thing which may render the insurance policy to be voidable or which may cause an increased premium, which I guess must have happened if the excess has increased so substantially too. This would give the RMC a breach of covenant should they choose to pursue a request to the leaseholder to take the necessary steps to mitigate future escapes of water from his demise, which would be the most appropriate thing to do to show their insurer that everything has been done to prevent leaks in the future. This in turn should help reduce the premium payable and excess applicable when these incidents occur. This is a difficult one as one needs to consider the practical implications as well as the financial.

Excess in an Insurance Claim

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