Buildings Insurance - Calculations : Long Post - Help req'd

[Pford75]

Whilst I agree it is unlikely that the CO would insist on a replica rebuild in the event of total loss, they can and do insist on like for like repairs in the event of partial loss.

In our situation, we have had damage to a very large flint wall - if this were a modern house, this could be repaired relatively simply. However, ours will be repaired in flint and reclaimed bricks, with the damaged coping stones being copied (at considerable expense). I am assuming that this is why the rebuild costs are comparatively higher. Total loss is actually easier, since it wouldn't make sense to rebuild a 'pastiche' as somone else has commented.

It does make the whole issue of cover rather complicated though, because with apx £3m of cover....there will come a point in a claim where the CO agrees that repair is nonsensical (eg. a fire) and the building can be replaced with a modern alternative. At this point though, the cost of the replacement drops dramatically - I could build a modern palace on my current plot for £3m! So, striclty speaking, I understand that for partial loss, the cost of repairs and replacement are much higher.....but th total loss figure for a listed building shouldn't really be any higher than for a modern building (since both would be replaced by modern construction).

My advice to anyone else is to get the insurer to 'agree' the total cover figure (which if they are reasonable, they will do at their expense - after all they want your business). This avoids any nasty surprises in the event of a claim

 

[middi]

In the event of a LB total loss, such as a fire in timber building, it would be futile to rebuild it like for like from a conservation point of view, simply because there is nothing to be conserved and that is the end of it.

The chances are that the owner has to submit a planning application to rebuild another new house on the same plot.

 

[Penners]

Yes, Middi, I'm sure you're right about that. Whatever the type of replacement house, it would definitely need planning consent.

 

[Pford75]

After all the helpful advice & support, I thougt I'd update you all on progress.

After much discussion the insurers agreed to honour the current claim in full and to send a specialist surveyor at their expense to undertake a full survey and reach a figure which they are happy with for cover going forwards.

Well, the survey company visited and appeared to know their stuff (not a bog-standard surveyor)...but he was clearly here for more than just a survey!! It turned into a full 'risk assessment' including security arrangements, state of repair, survey of trees close to the property, inspection of boundary wall, reviewing the employment contract for our cleaner & gardener (to check liabilities etc.) and so on....he even started adding up the value of items in the house to check contents cover as well!!

I wouldn't have objected, but felt the insurers were a little underhand to instruct him in this way, without making it clear to me. Told the surveyor this fairly bluntly.....he offerred to show himself around "to save my time" - which I declined ;-)

Anyway....in the end, his opinion on cover was only £180k more than we are already covered for (quite a bit to most people....but a long way from the underinsurance which was previously being suggested) and he seemed happy that our contents cover was adequate. Has asked us to request a revaluation once the new kitchen is fitted (expensive project).

Finally, he tried to request the removal of 2 trees (both subject to TPO and previously inspected by my tree surgeon only 3 months back) and also commented on a leaning wall (which is listed GII). We've had the wall inspected by a structural engineer last year (when an adjoining section was hit by a car) and they declared it safe...but his view is that it is "an uninsurable risk" and this is now subject to an exclusion clause in our policy......not a disaster....but given the premiums (which are now sizeable), one wonders why we bother with insurers......maybe I would be better off investing the premium myself to cover against the risk.

 

[skier-hughes]

but felt the insurers were a little underhand to instruct him in this way, without making it clear to me.

Surely this IS his job, to check everything that the insurance company are covering?

I mighty glad you are now happy the situation has been resolved.

 

[Nemesis]

Well, not so bad then, but not brilliant either. I agree with you though - very sneaky to ask for what they obviously did, but at least you will know where you stand.

I wonder if the Insurance Ombudsman would be interested in the wall situation? If it's been declared safe then I can't see why they refuse to insure. The trees are a bit of worry and you wonder if a get out clause for the future...

The cost of this kitchen sounds amazing though... solid gold fittings?

It's tempting I think not to pay - but once you've had something bad and expensive happen you realise that it's worth the insurance really.

 

[Pford75]

Yep you're right on the bad experience.

Looks like they have accepted the opinion of the tree surgeon...their surveyor's opinion was just "blimey...that's a big tree"...so didn't take too much effort to push back on this.

You're probably right on the wall...but since it's only a 6-7ft section, i'm not too worried if I end up having to pay for repairs due to exclusions.

As for the kitchen....it's become the Holy Grail of our project....the only thing that convinces my lady wife that living in 3ft of dust for several years is going to be worth it.....won't divulge a figure....but it makes my eyes water just thinking about it

 

[Spike]

As a surveyor often involved in reinstatement costs for insurance purposes and new to this forum, I thought I might add my penn'orth.

The onus for declaring the insurance value normally rests with the building owner at his own risk. If he seeks or relies on professional advice that later proves to be wrong, he would normally have a right of action against the surveyor to make good any shortfall in payment from the insurer. Some insurers do offer a service of valuing and insuring at their risk - at a cost, of course, but giving peace of mind.

The value insured is the full reinstatement value based on like for like replacement. This is the basis of the risk upon which the premium is calculated. If a building is listed or in a conservation area the local authority may insist upon reinsatement in this way (in theory, even in a total loss situation) so the decision about what and how to rebuild may not be entirely in the owners hands. In a partial loss situation, an insurer may in fact end up paying out more than the full reinstatement value - as the costs of shoring, careful demolition/dismantling and conservation of remaining structures is expensive compared to demolition and rebuilding, but this is his risk.

If a building is totally lost - although this is rarely the case - the insurer may 'win' by not having to pay out the full reinstatement value if a new house is built in modern materials, but the owner would have a say in what is rebuilt, so would perhaps be in a position to do a deal with the insurer.

The cost of rebuilding an older property cannot normally be calculated on the basis of cost/m2. £2000/m2 is not unusual and I have valued houses at double this. Such buildings are often a composite of structures built in different materials and do not easily sit in an 'average' range, unlike your standard modern house built to current bulding regulation
standards. The only reliable method of valuing at present is to undertake a measured approximate quantities survey. This takes time to produce and is therefore not cheap, but having dealt with cases of underinsurance where an owner is facing financial dire straits, the one regret is not having fully insured.

There is an English Heritage guide to insuring historical buildings and the RICS can help in directing people to appropriately qualified surveyors.

 

[Nemesis]

This is difficult though - our insurance is based on the mortgage company's valuation - when the surveyor came round a number of years ago and we re-mortgaged.

Although not listed, our house is a very traditional construction, in parts dating back over 200 years, with many original features etc.

We just accepted the figure we were told, and paid out annually for the insurance, with of course rises etc based on inflation.

Should we now be seeking a new and independent valuation? I think this could have implications for many people.

 

[Flyfisher]

You're probably right on the wall...but since it's only a 6-7ft section, i'm not too worried if I end up having to pay for repairs due to exclusions.

I would push back on the wall because of the public liability issue. You said you have a structural engineeer's report stating the wall is safe, so I'd hope that would be sufficient ammunition.

I agree that 'self-insuring' a 7ft section of wall is probably no big deal in repair terms, but if it collapsed and injured someone (or worse) then the costs might not just be for repairs. And any claimant would be able to point to the uninsurablility of the wall as 'proof' of its dangerous condition.

 

[skier-hughes]

Extremely good points made by Flyfisher, but to counter that arguement, you could always use the surveyor who declared it safe......... but then again, is that like a car MOT, it was safe on the day he came, but on the next day it may no longer be safe... the surveyor could argue that 6 months down the line he couldn't possibly know what had happened to the wall and whether it was still safe.... does this mean we now need to have our walls/trees etc checked annually before our insurance renewal?

I'd push for wall inclusion as well on the grounds of PL more than anything else.

Graham

 

[Spike]

Nemesis,
You are right that its a problem and one that people don't know about and therefore don't know to investigate. You'd think the Council of Mortgage Lenders would have a view on this, but they don't - they say its an isssue for insurers; and their only interest is protecting the value of their loan. You'd think that the Association of British Insurers (ABI) would have a view, but they have bigger fish to fry in worrying about housing in flood plains, extreme weather, etc. Listed buildings represent a small part of the market and tend to be better protected and cared for, so the risk for insurers, as a proportion of the insurance market as a whole, is small.

The long and short of it is that it is the owner's responsibility to establish the insured value; and if the value is insufficient, an owner can only rely on the goodwill of the insurer in a loss situation. When I spoke to ABI the message was that insurers would tend to be lenient to avoid the bad publicity of underpaying on large numbers of claims - and this is generally the case. However, there is a limit on this leniency if the underinsurance is significant.

 

[Flyfisher]

Extremely good points made by Flyfisher, but to counter that arguement, you could always use the surveyor who declared it safe......... but then again, is that like a car MOT, it was safe on the day he came, but on the next day it may no longer be safe... the surveyor could argue that 6 months down the line he couldn't possibly know what had happened to the wall and whether it was still safe.... does this mean we now need to have our walls/trees etc checked annually before our insurance renewal?

You're right about having the surveyor's report 'up your sleeve' but in the event of an incident you'd find yourself in the middle of an argument between the insurance co defending their decision not to insure (and having their decision strengthened by the very incident in question) and the surveyor saying - as you rightly point out - that things have obviously changed since the inspection, otherwise it would still be OK. A complete nightmare, and one probably being played out in court because of the incident and subsequent claim.

The point about 'annual inspections' is a good one. I believe the onus is on the householder keeping the property in 'good repair', but how on earth do you prove this in practice. Indeed, how do you even define 'good repair'. If a storm damages your roof but not your neighbours, is it prima facie evidence that your roof is not in 'good repair'?

It's all a minefield of course, but having an 'uninsurable' wall in the first place is not a good idea. There is also the need to disclose this to any new insurer, so you might be storing up problems for the future. Definitely push back on that decision while the issue is fresh - there's nothing to lose (except, maybe, a higher premium )

 

[Nemesis]

http://www.telegraph.co.uk/property/main.jhtml?xml=/property/2005/10/08/prfire08.xml