Insurers Refuse to Pay for Alternative Accommodation in Case of Subsidence

Michael Holroyd, a homeowner in West London, has been forced to live and work in a "bomb site" for nearly five months due to a dispute with his insurer, Royal Insurance, over providing alternative accommodation after his home suffered from subsidence. Despite being informed by structural engineers that the house was uninhabitable, Royal refused to pay for temporary accommodation, citing Mr. Holroyd's unusual lifestyle as a reason. The company eventually agreed to pay after the intervention of The Observer.

Key Takeaways:

• Under most buildings policies, insurers are responsible for paying the cost of "reasonable temporary alternative accommodation" when a home becomes uninhabitable due to subsidence.
• In Mr. Holroyd's case, Royal Insurance refused to pay for alternative accommodation, claiming that the homeowner's unusual lifestyle made it inconvenient for the company to provide temporary housing.
• Insurers have been increasingly trying to avoid paying alternative accommodation costs, even when a house is deemed uninhabitable, by paying only the average rent for the type of accommodation deemed suitable to move into.
• Policyholders who want to be rehoused to a comparable standard may have to pay the extra costs themselves.
• The small print of policies often restricts the cost of alternative accommodation to 20 per cent of the overall sum assured.
• A code of practice drawn up by the Association of British Insurers aims to resolve disputes over liability by ensuring that policyholders who detect subsidence soon after switching company are not left high and dry.

Statistics:

• The cost of claims made between eight weeks and one year after switching insurers will be shared equally by both insurers.
• 50 ABI members have signed up to the new agreement, representing only a little over two-thirds of the buildings insurance market.
• Michael Holroyd's repairs are due to be finished later this month.

*It took nearly five months for the dispute to be resolved after The Observer's intervention.

Sources:

• The Observer
• Association of British Insurers (ABI)