INTERPRETING “STRUCTURE” – HIGH COURT AFFIRMS OMBUDSMAN DECISION:
LLOYD’S INSURANCE COMPANY, FINANCIAL SERVICES AND PENSIONS OMBUDSMAN AND DONNELLY AND LUIJKX
This matter came before the High Court by way of Statutory Appeal taken by the Insurer against a decision of the Financial Services and Pension Ombudsman made in respect of a complaint concerning an insurance policy. The Policy provided cover against structural defects in the property.
Donnelly and Luijkx purchased a house in 2006 with the benefit of an insurance policy which covered against structural defects in the property. In 2010 it emerged that some of the houses in the development had sustained damage associated with pyrite in the in-fill. Further defects came to light in the property when it was found that deflecting roof trusses in the attic were causing gaps and cracks in the ceilings and walls of the house. The property owner’s engineer in their report stated that “we are of the opinion that the damage observed is a direct result of the structural inadequacy of the in-situ trusses”.
There were two separate issues, one being a pyrite related property damage and damage to the structure of the roof. The Provider gave cover in respect of the pyrite damage but did not accept that the damage relating to the roof involving deflecting roof trusses was covered. The basis for the Provider’s refusal was rooted in the view that the roof trusses themselves, which it was accepted was structural and therefore covered by the policy, were not inherently defective. It was maintained that the deflection to the roof trusses arose from the manner in which a water tank had been positioned in the attic area without adequate or properly placed load spreading supports which in turn caused an intended load to be applied to the trusses. The Provider maintained that this constituted damage “caused to the structure” which was outside of the Policy rather than damage inherent “in the structure” which was covered.
The Ombudsman decision:
Donnelly and Luijkx made a complaint to the Ombudsman who upheld their complaint on grounds that it was unreasonable, unjust and improper for the provider not to remediate the damage, and the Provider was also ordered to compensate them for inconvenience in the sum of €20,000. The entire complaint centred on the question of whether cover was properly declined having regard to the terms of the contract of the insurance and the evidence as to the cause of the damage. The Provider appealed the decision maintaining that the Ombudsman was guilty of serious and significant error in construing the definitions of “structure” in the policy.
The Ombudsman’s jurisdiction to consider and to determine complaints is created by part 5 of the Financial Services and Pensions Ombudsman Act 2017 and more particularly under Section 60. The Ombudsman may order redress including financial redress for the complainant as he considers appropriate. Any financial redress shall be such amount as the Ombudsman deems just and equitable having regard to all the circumstances which shall not exceed any actual loss of benefit under the scheme concerned or the statutory cap under Section 60(50). The Ombudsman noted that the fact of the application of the policy had to be subject of expert engineering analysis indicated the complexity of the contractual provision and he did not accept the provider’s position. He believed that any reasonable examination of the circumstances of the complaint indicated that the defect was with the structure.
The jurisdiction to order compensation by the Ombudsman is provided for in Section 60 (40) (d) which empowers the Ombudsman to pay an amount of compensation to the complainants for any loss, expense or inconvenience sustained by the complainants as a result of the conduct complained of. The level of compensation is however capped by this section at a monetary sum of €250,000. In this case a sum of €20,000 was awarded by the Ombudsman.
On Appeal the decision of the Ombudsman was upheld and it noted that structure under the policy is defined as including “load bearing parts of … roofs” and accordingly that the trusses are part of the structure. The Court was satisfied that the Ombudsman was entitled to find that it was unreasonable for the provider not to accept that the damage was caused by a defect in the design, construction, material, components, and workmanship of the trusses and therefore covered by the policy. Furthermore, the Court was satisfied that the level of compensation ordered was within a range that was reasonable and they affirmed the decision and directions of the Ombudsman.
Niamh O’Connor| Partner
MDM Solicitors | 18 South Mall, Cork, T12 WR97
T: +353 (21) 239 0620