Insurer mops up after tenant's pipes burst

Posted on 2 March 2016

Insurer mops up after tenant's burst pipe

Now in the glare of the political spotlight, a courtroom test case last month provided a chance for 'generation rent' to try the field, and assess whether the underdogs had it in them to win even a minor skirmish. Step forward a pair of gladiators to champion their feudal layers: the unlikely hero of the serfs, a millionaire physicist; while the noble’s delegate, an out-of-pocket insurance company, entirely characteristically wanting to go Dutch on the bill.

Tenant Ms Govina had left her rented accommodation over the Christmas period. The pipes froze during her absence. They burst. The property was damaged. The landlord had an insurance policy which covered accidental damage. The insurance company, NFU Mutual, paid for the repairs. The insurance company sued Ms Govina for costs. 

Among the arguments put forward were that Ms Govina was obligated under the lease to keep the heating on for a number of hours every day, and that she had failed to do so. She contended that she had set a timer, and that a mechanical failure had caused her best laid plans to go awry. Her occupation was invoked to suggest she should be all-too-familiar with the physical properties of H2O. In any event the key argument was whether the landlord’s insurance policy existed to protect her as well as the landlord from financial consequences in case of accidental damage to the property.

Though, arguably, Ms Govina herself might have had the means to settle a six figure claim for damages, this case had the potential to set a precedent which would slap a straw on many a burdened-to-capacity camel. Small comfort to tenants paying for the mortgages of others had been the thought that at least part of the cost of rental went towards protecting them from liability. The alternative would require tenants everywhere to add an extra monthly bill to their immoderate portfolio, almost certainly by law so as to prevent the perils of impecuniosity. The ‘surprised’ Ms Govina refused to pay.

She won. The judge agreed that the insurance policy was for her benefit as well as the landlord’s. The £128k bill was compounded with £100k legal fees and NFU departed, bemoaning a terrible harvest. However, the overall victor remains unclear. Insurance is maths, and maths is cold. Insurance companies who thought they might be indemnified against liability for tenants’ accidental damage, may now tweak the inputs of their equations. This could mean landlords being charged higher insurance premiums, and, therefore, charging higher rents. Economic burden, like everything else, rolls downhill.

The good news is, at least until the prices are adjusted, tenants everywhere can enjoy a happy hour of below market prices.

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