A tenant who faced “the most expensive Christmas of her life” after being handed a £128,000 bill for a leaky pipe has won a landmark decision in the High Court.
The woman rented a four-bedroom cottage to use for holidays and weekends but a cold snap led to pipes bursting resulting in what was described as “severe flood damage” in the £2600 a month cottage. The damage was covered by the landlord’s insurance policy and so the tenant was surprised and shocked to receive the hefty repair bill from the insurance company.
The landlord’s insurer insisted that the tenant was personally liable for the loss, claiming that the woman had breached her tenancy agreement by failing to leave the heating on in the cottage. She insisted that she had read the lease and knew she had to leave the heating on to prevent pipes freezing, and blamed the disaster on ‘mechanical failing’ in the heating system.
The insurance company also argued that as a short-term tenant, she did not come under the umbrella of her landlord’s policy.
The tenant’s barrister argued that the landlord’s policy was there to protect the tenant too from the financial consequences of accidental damage to the cottage. He said that the insurance was for the benefit of both her and the landlord if she was not covered by her landlord’s policy, anyone renting a home or taking a holiday let in the UK would feel the impact.
While the insurance company’s barrister pointed out that the tenant paid nothing towards the landlord’s premium, the tenant’s barrister insisted that the tenant’s share of the premium is included in the rent paid. The rent would have been less if the cover provided by the policy had given the tenant no protection and her barrister argued that liability for damage caused by insured risks should be met by the insurers, not the tenant.
There really hasn’t been a case like this before in the private residential rental market and if the judge had found that the insurance policy didn’t apply for both the landlord and the tenant, which would have been a major concern for all private tenants.
However the High Court rejected all the arguments put forward by the insurance company and ruled against them. The judge said that a policy only benefiting the landlord would severely disadvantage tenants and would simply benefit the insurer as the tenant would be forced to seek their own insurance for the same risk, already insured.
He agreed that tenants indirectly contributed to landlords’ insurance premiums through the rent they pay, stating the landlords’ duty to insure was one of a series of mutual obligations and it has a direct effect on the level of rent payable.
I think it is worthwhile making your landlord clients aware of this ruling. It’s too early to say whether this ruling – which led to the insurance company footing legal costs of £100,000 on top of having paid the landlord’s claim – will cause insurers to consider the potential impact on landlord premiums. However forewarned is, as they say, forearmed and communication of this nature with your clients helps demonstrate that you truly have their interests at heart.
Lee Denton
Senior BDM Source Insurance
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