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technical note

buildings insurance: damage to underground pipes made from pitch-fibre

 

1. what is special about underground pipes made from pitch-fibre?
2. how does this affect insurance claims?
3. our approach to disputed claims
4. accidental damage must have occurred
5. duty to act in good faith
6. if the insurer says the damage is not accidental, as defined in the policy
7. if the insurer says the damage is not accidental, but that is not defined in the policy
8. if the insurer says the damage is excluded as wear and tear
9. if the insurer says the damage is excluded as gradual deterioration
10. if the insurer says the damage was caused by faulty workmanship
11. if the insurer says the damage was caused by faulty or defective design
12. if there is a specific exclusion concerning pitch-fibre pipes

1. what is special about underground pipes made from pitch-fibre?

Underground pipes made from pitch-fibre were often used in the 1950s and 1960s, but they are now often said to be inherently defective. They frequently have a much shorter life than pipes made from clay or heavy-duty plastic, and they tend to distort and/or collapse.

A Review of Existing Private Sewers and Drains in England and Wales published in July 2003 by the Department for Environment, Food and Rural Affairs said:

The pipes [made from pitch-fibre] were relatively inexpensive and easy to handle and install. However, it became apparent that these pipes were susceptible to the delamination of their inner surface, ruining the integrity of the pipes. It was also discovered that, under normal conditions, they were susceptible to collapse under applied loading sooner than pipes made of more rigid materials.

2. how does this affect insurance claims?

Most household buildings-insurance policies cover accidental damage that has occurred to underground water and drainage pipes that serve the insured buildings, provided the pipes are the policyholder’s responsibility. But such policies often contain a number of exclusions – either generally or specifically in respect of accidental damage – including wear and tear, gradual deterioration (or gradually operating causes) and faulty workmanship or design. 

Some insurers may refuse to pay claims where it turns out that the underground pipes were made from pitch-fibre. They may say that damage to pipes made from pitch-fibre is not covered under the policy – because it does not fall within the definition of accidental damage, or alternatively because it is excluded as the damage was caused by wear and tear or gradual deterioration or another reason covered by an exclusion in the policy.

But the policyholder may only have realised that the underground pipes are made from pitch fibre when there is a blockage or some other problem and the pipes are inspected. 

3. our approach to disputed claims

This note sets out our approach to disputed claims for damage that has occurred to underground pipes made from pitch-fibre. It includes our approach to whether or not the insurance claim is:

• covered by the definition of accidental damage; or
• excluded by some of the common terms of household policies.

This note also sets out our view on the importance of explaining the effect of such definitions and terms.

Taking account of changing policy wording, our approach has been the same for many years. It goes back to 1999 – when the Insurance Ombudsman Bureau (one of our predecessor ombudsman schemes) published an article entitled Pipes of Pitch in its Bulletin 20 in spring 1999.

However, we are aware that policy wording has been changing with the intention of excluding claims arising from the collapse of pitch-fibre pipes. We have, therefore, had to consider the implications of these changes in policy wording and how these have been brought to the attention of the policyholder.

We take the view that the policy terms should be applied where:

• they are fair, and written in plain, intelligible language; and
• their effects were apparent to consumers or were brought to their attention when they were buying or renewing the policy.

It does not matter if an exclusion clause is a general one covering the whole policy, or a specific one relating to underground pipes only, provided it is written in such a way that the ordinary consumer can be left in no doubt that it applies to all sections of cover, or at least to accidental damage to underground pipes.

4. accidental damage must have occurred

Insurance does not usually cover events that are inevitable or anticipated – nor preventative work (such as general maintenance or the cost of stopping damage occurring in the future). So a policyholder who discovers that he/she has underground pitch-fibre pipes that might collapse, but have not already distorted/collapsed, cannot usually expect the insurer to pay for them to be replaced under the accidental damage cover.

Most policyholders will not know they have underground pipes made from pitch-fibre. But there may be exceptional cases where an insurer can demonstrate that the policyholder ought reasonably to have realised the pipes were liable to fail – for example, because of a pre-emptive CCTV inspection, or because neighbouring pipes had already failed and the housing estate where the policyholder lives was generally known to contain defective (or potentially defective) pitch-fibre pipes. In such cases, the policyholder who does nothing to prevent the pipes from deteriorating or failing may be unable to demonstrate that the damage was unexpected when a blockage eventually occurs.

5. duty to act in good faith

Buildings-insurance policies do not automatically cover everything that might happen to a property. It is for each insurer to decide – as a legitimate exercise of its commercial judgement – what risks its policies cover and what risks they exclude.

But the law treats insurance differently from other types of contract. It implies a duty of utmost good faith from both the policyholder and the insurer. We take this into account in considering any provision in the insurance policy on which an insurer seeks to rely in order to exclude (or restrict) its liability for damage to underground pipes made from pitch-fibre.

We are likely to consider that it would not be fair and reasonable for an insurer to rely on such a provision, unless it has taken appropriate steps to ensure that the significance and effect of the provision in the policy is clear to the average consumer to whom the policy is being offered. The potential problems with such pipes are (or should be) well-known to insurers and insurance intermediaries – but are not well-known to the average policyholder. 

Insurers and intermediaries may have information that particular properties or housing estates are likely to have pitch-fibre underground pipes. We would take into account what the insurer or intermediary did to share that information with affected consumers at the time the policy was taken out or renewed, so that the significance and effect of an exclusion – included in the policy in order to avoid liability for loss or damage to such pipes – could be understood.

6. if the insurer says the damage is not accidental, as defined in the policy

Some insurance policies define what they mean by "accidental damage" to the insured property. A typical definition might be that it means the damage must occur suddenly and as a result of an external, visible and violent cause (or words to that effect). So damage to an underground pipe by, say, a worker drilling into the ground above would clearly be a case of accidental damage under such a definition.

The way the definition is communicated to the policyholder is important – especially where the policy uses familiar-sounding words in a way that does not coincide with their ordinary, everyday meanings, or where the effect on the insurance cover is equivalent to a significant and/or unusual exclusion. Just as it is good practice for attention to be drawn to such exclusions, we take into account how clearly attention was drawn to the definition and its impact.

Where an insurer can demonstrate that:

• the policy clearly defines, in plain and intelligible language, what it means by accidental damage; and
• the definition or its effect was adequately brought to the policyholder’s attention; and
• the circumstances of the claim fall outside a fair and reasonable interpretation of the definition;

we are likely to agree that it is fair and reasonable for an insurer to reject a claim for damage/blockage to the pitch fibre pipe on the grounds that it was not accidental damage. However, we have seen very few complaints about loss or damage to underground pitch-fibre pipes in which insurers have been able to demonstrate that the loss or damage should not be regarded as accidental.

7. if the insurer says the damage is not accidental, but that is not defined in the policy

Other policies do not define what they mean by "accidental damage", in which case we give the term its ordinary, everyday meaning. Our long-standing approach is that, where the insurance policy does not contain a clear definition to the contrary, we are likely to regard damage to pitch-fibre underground pipes following ordinary usage as accidental damage.

That is because the damage was unexpected and unintended. An ordinary policyholder would not expect underground service-pipes to be sub-standard and consequently fail. And it is not something that the policyholder could know or do anything about until it is too late. In these circumstances, we are likely to treat damage as accidental even if the underlying cause occurred gradually – for example, as a result of delamination of pitch-fibre pipes, encroachment by tree roots or the passage of heavy vehicles.

Accordingly, if an underground pipe made from pitch-fibre unexpectedly collapses or becomes blocked, we are likely to consider it fair and reasonable to treat the collapse and its effects as accidental damage. 

8. if the insurer says the damage is excluded as wear and tear

Where an insurer can demonstrate that:

• the policy contains a clearly-worded provision excluding loss or damage caused by wear and tear, either generally or in respect of underground pipes; and
• the provision was adequately brought to the policyholder’s attention;

we will want to understand how the loss or damage occurred. If the pitch-fibre underground pipes have failed simply as a result of ordinary usage, then we are unlikely to be persuaded that this is sufficient to establish that the failure arose as a result of wear and tear.

Often the failure will result from an inherent flaw in the structure of the pitch-fibre pipes – a defect that was not known at the time they were manufactured and/or installed. In these circumstances, we are unlikely to agree that it is fair and reasonable for an insurer to reject a claim for damage to pitch-fibre pipes on the basis that it was caused by wear and tear.

9. if the insurer says the damage is excluded as gradual deterioration

We are likely to accept that damage to, or the collapse of, pitch-fibre underground pipes can often be attributed to gradual deterioration. That is because an inherent flaw in the structure of the pipe causes a gradual deterioration in the pipe. So where we accept that the pipes failed unexpectedly, we need to consider any provision in the policy that the insurer argues clearly excludes the effects of gradual deterioration or "gradually operating causes".

Where an insurer can demonstrate that:

• the policy contains a clearly-worded provision excluding loss or damage caused by gradual deterioration (or gradually-operating causes), either generally or in respect of underground pipes; and
• the provision was adequately brought to the policyholder’s attention; and
• the damage which led to the insurance claim resulted from a process that has taken effect gradually over many years; 

it is likely that we would agree that it is fair and reasonable for an insurer to turn down a claim for damage to pitch-fibre pipes – on the grounds that it was excluded as the claim resulted from gradual deterioration (or a gradually operating cause).

10. if the insurer says the damage was caused by faulty workmanship

Where an insurer can demonstrate that:

• the policy contains a clearly-worded provision excluding loss or damage caused by faulty workmanship, either generally or in respect of underground pipes; and
• the provision was adequately brought to the policyholder’s attention; and
• the damage which led to the insurance claim resulted from faulty installation (rather than from an inherent flaw in the structure of the pitch-fibre pipes);

it is likely that we would agree that it is fair and reasonable for an insurer to turn down a claim for damage to pitch-fibre pipes – on the grounds that it was excluded as faulty workmanship. However, we have seen very few complaints about loss or damage to underground pitch-fibre pipes in which insurers have been able to demonstrate that the loss or damage arose as a result of faulty workmanship.

11. if the insurer says the damage was caused by faulty or defective design

Where an insurer can demonstrate that:

• the policy contains a clearly-worded provision excluding loss or damage caused by faulty or defective design, either generally or in respect of underground pipes; and
• the provision was adequately brought to the policyholder’s attention;

we will want to understand how the loss or damage occurred. If the pitch-fibre underground pipes have failed simply as a result of an inherent flaw in the structure of the pipes – that was not known at the time they were manufactured and/or installed and did not become apparent for many years – then we have not been persuaded that this is sufficient to establish that the failure arose as a result of faulty or defective design.

In these circumstances, we are unlikely to agree that it is fair and reasonable for an insurer to reject a claim for damage to pitch-fibre pipes on the basis that it was caused by faulty or defective design.

12. if there is a specific exclusion concerning pitch-fibre pipes

Some newer household buildings-insurance policies contain a provision specifically excluding loss or damage caused by the failure of pitch-fibre pipes.

Because such clauses are still relatively unusual, and have a significant impact on the nature and scope of cover, we are likely to consider it fair and reasonable to apply the exclusion only if it was drawn to the policyholder’s attention before the policy was sold (or renewed, if introduced as a change to an existing policy) – and the exclusion was written in such a way that an ordinary policyholder can be left in no doubt about its effect. If the insurer did not highlight an exclusion for pitch-fibre pipes, we are unlikely to consider it fair and reasonable for the insurer to rely on it.

In cases where:

• the policy contains a clearly-worded provision excluding loss or damage to underground pitch fibre pipes; and
• the provision was adequately brought to the policyholder’s attention;

it is likely that we would agree that it is fair and reasonable for an insurer to reject a claim resulting from the failure of pitch-fibre pipes.

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