In early 2020, Charlie wanted to obtain some insurance for his small cleaning business. He used a website which made suggestions about different insurance policies via a ‘self-help’ tool. The website provided a ‘no advice model’ meaning there was no advice about whether particular policies were suitable for a particular customer. The self-help tool suggested Charlie obtain quotes for public, cyber, employer, and statutory liability policies, which he did through the website.
The next morning, Charlie cleaned the home of some new clients. Charlie used a steam mop to steam clean the clients’ unique wooden floor.
Charlie calls the website company
Later that afternoon, Charlie called the website company. An automated message said the company was not providing financial advice and that customers needed to determine whether policies were suitable for them and/or obtain financial advice. Charlie then spoke to a staff member who told him that a public liability policy provides cover if you injure a third party or damage a third party’s property during the course of work that you do.
Charlie said to the staff member that a lot of the homes he cleaned contained antiques and other valuable items, and the main reason for getting the insurance was in case any of those items were damaged. The staff member said that if Charlie was cleaning a client’s home and say, an expensive vase was knocked over, that’s when the cover would kick in.
Charlie purchased a public liability policy which came into effect that same afternoon.
The clients contact Charlie about damage to their floor
A week later, Charlie cleaned the clients’ home for a second time. Soon after, the clients contacted Charlie and asked what he’d used on the floor because there were big marks on it. Charlie investigated with a builder, and the manufacturer of the mop he’d used. The evidence suggested that the mop was suitable to use on the particular type of wooden floor, and that the damage was likely due to deferred maintenance by the clients.
Insurance claims are made
Both Charlie and his clients made claims to their insurers. The clients’ insurer wrote to Charlie and said he was responsible for the repair costs of $12,000. The clients’ insurer filed a claim in the Disputes Tribunal to recover the $12,000 from Charlie.
Charlie’s insurer declined his claim to cover the $12,000 because they said that the damage had occurred before the policy came into force (it had occurred in the morning, and the policy came into force in the afternoon). Charlie’s insurer also said that even if the damage had occurred once the policy had come into force, the claim would have been declined because of an exclusion clause excluding liability for damage to ‘property that he was working on’.
Charlie thought his claim had been incorrectly declined and complained to FSCL.
Charlie said that if the public liability policy did not cover him for property he was working on, it was not fit for purpose. The largest risk to his business was damage to clients’ property. He expected to have cover for this risk given he made it clear he wanted a policy to insure against damage to clients’ property.
However, Charlie’s insurer said that the policy was fit for purpose as it covered Charlie if he damaged property owned by his clients. Over the phone, the website company had given an example of the type of damage that would be covered: knocking over a vase (that wasn’t being cleaned) while say, cleaning the floor. The insurer said that, unfortunately, Charlie thought that a public liability policy would go further than that and would cover damage to property that he was actually being paid to clean, like a floor (called ‘property being worked on’).
The insurer also said it’s common for public liability policies to exclude damage to ‘property being worked on’ by an insured. They also said it was unlikely there would have been another policy on the market that Charlie could have purchased that would have covered his claim.
We reviewed all the information about the complaint including the telephone calls between Charlie and the website company which placed the insurance.
In this situation we considered that the website company was the insurer’s agent, meaning that anything the website company had said or done (or not done) was attributed to the insurer.
We accepted the insurer’s argument that the website company sold Charlie a policy that they thought he was asking for. We agreed with the insurer that it appeared Charlie had mistakenly thought that a public liability policy would provide cover for damage to ‘property being worked on’.
Further, the website company made it clear that they did not provide financial advice on the suitability of policies for particular customers, and so the website company (as the insurer’s agent) had not erred in selling Charlie the public liability policy.
We also noted that the evidence seemed to suggest that the damage to the floor had occurred in the morning before the public liability policy was put in place in the afternoon.
Further, we noted our view that, in any event, it appeared the cause of the damage was not any defective workmanship on Charlie’s part. It appeared to have been caused by the clients not maintaining their wooden floor.
Charlie thanked us for providing our views on this and said he would make note of our views at the Disputes Tribunal hearing.
We said that Charlie’s insurer had correctly declined his claim and we suggested Charlie discontinue his complaint. Charlie followed our suggestion, discontinued his complaint about his insurer, and concentrated on the Disputes Tribunal hearing.
Insights for consumers
If you’re not obtaining financial advice about business insurance policies and you’re buying ‘off the shelf’ products, it’s really important that you read your policies carefully and have a good general grasp of how insurance policies work. If you don’t have much experience with insurance, you’re unsure about how the policies work, or your business is quite niche, it’s advisable to obtain tailored advice from a financial adviser.