Take a look at what the Financial Omudsmen found:
“When a mains pipe burst underneath Ms K’s kitchen sink, water flooded everywhere. There was a great deal of damage, particularly to the kitchen units.
Ms K’s insurer accepted the claim, but offered her only 50% of the cost of replacing the kitchen units. It pointed out that the units were quite old and had probably already suffered a fair degree of wear and tear before the flood damage occurred.
Ms K said this was unfair, as she could not afford to replace her kitchen units for the amount the insurer had offered.
When we looked into Ms K’s complaint, we felt the insurer had not handled the claim fairly and reasonably. Like most home policies, this provided “new for old” cover. The policy did not contain any exclusion for items that had already suffered some degree of “wear and tear“. And there was no doubt that Ms J’s units had been damaged as a result of a genuine incident.
“Indemnity” policies simply require the insurer to put the policyholder back to their pre-incident position (so far as reasonably possible). But as this was a “new for old” policy, the insurer was required to replace the damaged items with new ones, or to give the policyholder enough money to cover the cost of buying new items.
The insurer pointed out that the terms of the policy gave it the discretion to arrange repair rather than replacement in certain circumstances. However, expert evidence, together with photographs of the units, convinced us that repair would not be a reasonable solution in this case.
Regardless of their previous condition, all but one of the units had been severely damaged by the escape of water. So we said it was fair and reasonable for the insurer to meet the cost of a complete set of new units.”