Insurance for property owners amidst the COVID19 pandemic 2 Jun 2020
INSURANCE ISSUES ARISING
SHORT TERM ISSUE
Dealing with the short term in the first instance that has caused waves in the insurance world: A tiny minority of landlords who had previously chosen to extend their policy or purchased an add-on to cover “Rent Guarantee”, have called upon their policies where the tenant cannot afford to pay their full agreed rental as a result of Covid-19. This has caused an ethical issue in the industry as this requires the landlord to serve an eviction notice. We are also aware that landlords have looked to purchase this policy post-Covid-19 – this has resulted in the market withdrawing this type of cover. As the world adjusts and returns to a new normality, so will these policies.
LONG TERM ISSUES
The longer-term issue concerns unoccupancy during the pandemic: most (but not all) insurers have chosen to relax their unoccupancy rules in line with Government directives. However, the age-old issue of the escape of water damage whilst properties are empty is always a danger. According to the Association of British Insurers, 2018 was the worst year on record for escape of water (EOW) claims in the UK, with UK insurers paying out almost £8m a day solely on domestic EOW claims alone. The average cost of a domestic EOW claim has risen to more than £2,500. In larger residential blocks, claims totalling well over a million are by no means exceptional.
ESCAPE OF WATER CLAIMS
Understanding how and why leaks occur – and what to do to manage them – is key to containing the associated costs. By far the most common cause is poor workmanship. In residential environments, this problem has been exacerbated by the booming popularity of DIY domestic improvements.
Push-fit and compression fittings appear to be particularly problem-prone, but soldered fittings are by no means trouble-free. Issues typically arise when incompatible parts have been used in combination, or where one or more components have been damaged in the process of installation or left out altogether.
There is a common belief that problems typically arise when a building is left unoccupied, unmonitored, and poorly maintained. Properties left unheated are dangerously vulnerable to fluctuations of hot and cold which can cause pipes to burst, as water freezes then thaws again.
PREVENTION BETTER THAN CURE
With EOW, as with most of life’s problems, prevention is better than cure. Regular checks should be carried out on fill valves, overflows, fittings and seals around anything that’s plumbed into the water supply. It’s also important to ensure connected appliances are regularly maintained, repaired or replaced, and properly secured, so they can’t cause leaks by moving around.
Tell-tale signs of future problems include greenish discolouration around joints in copper piping and cracks or ‘stretch marks’ in plastic pipes and fittings. Unusual smells can also provide an early warning of a blockage in the making.
New leak detection devices now available can massively reduce the danger of EOW going unnoticed for long periods of time and causing extensive damage. Wifi-enabled SMART leak detectors can now be fitted in areas where EOW is likely to occur. These automatically message individuals who can trigger an investigation or remedial action. Fitting such devices sends a reassuring message to insurers and could in future secure premium reductions.
A LEAK FROM ABOVE
It’s worth mentioning at this point that there is a common belief that where the property is a flat or with a block if an escape of water occurs from a flat above, it falls on their insurance to pay for your resultant damage. This is not the case. Unless there is clear negligence, damage in this respect falls on the property owner’s own policy, just as a fire.
Should an ESCAPE OF WATER incident arise, it’s important to have clearly understood response methodologies in place:
- Who should respond first?
- What actions should a landlord or tenant take in the first instance – e.g. switching off the water supply and/or electricity supply and/ or evacuating tenants?
- Does the tenant know where the stop cock is?
- Who needs to be notified?
If you are in any doubt about the answers to these questions, please contact Sara HERE