I am delighted to introduce another insightful post from housing consultant and former TRO, Ben Reeve-Lewis, this time on worrying aspects of insurance (which I touched on also last year in a previous post on insurance for lodgers).
Criminal convictions and insurance
I have recently become aware of quite an alarming development in private renting. It is to do with insurance policies in relation to criminal convictions of residential occupiers.
A friend of mine pointed me in this direction, she is the procurement officer for a local authority responsible for bringing in private lettings as a discharge of housing duties for people applying for homelessness assistance.
All sensible landlords should take out insurance but in many cases their insurance policy is invalidated when the occupier has an unspent criminal conviction within the past 5 years. This applies to not only tenants but owner occupiers too.
The situation is highlighted in the frightening case of poor Michelle Barber. Her estranged husband Gary Hooley burnt down her home and was jailed for 4 years for arson. Ms Barber understandably claimed on her insurance a sum of £241,000 because the house had been razed.
Insurers Aviva (formerly Norwich Union) paid out but 2 weeks before she was due to move back into her home, insurance investigators found out that she had, just a few years prior to taking out the policy, been fined £150 for an overpayment of housing benefit. Aviva duly voided the policy as a result and are claiming the money back off of her for failing to disclose a previous conviction.
They stated that had she disclosed the fine they would not have offered her a policy. This is apparently common practice in the world of insurance and apart from general motoring offences many insurance policies are invalidated if an occupier fails to declare an unspent conviction however trivial.
Journalists for the ‘Cash’ column of the Observer newspaper contacted Norwich Union and Direct line insurance asking for cover and declaring an imaginary £100 fine from 2 years ago for dropping litter to see if they could get cover. Both companies declined to offer insurance.
Now this is bad enough when it comes to the policies of owner occupiers but it also effects the tenants of landlords. If a tenant has an unspent criminal conviction then this can void the landlords insurance. This is the case even if the tenant doesn’t tell the landlord about it, which understandably many tenants would not feel was any of the landlord’s business.
Another friend of mine is the procurement officer for another local authority and has been set the task of finding landlords willing to let accommodation to ex offenders. She has to wrestle with the idea that the offence could seriously effect the landlords insurance against the prospective tenant’s right to privacy and her own duties under the Data Protection Act.
I can understand landlords not wanting an ex offender in their property in case it invalidated their insurance but does this then mean that ex offenders will not be able to ever rent accommodation?
Approximately 7.3 million people in the UK has a conviction or caution behind them. Insurance is always underwritten against certain risk factors and if, to use Michelle Barber’s unfortunate case, a residential occupier has a previous conviction for setting fire to their own home and then subsequently did it again I would think that most people would understand the company’s problem but how can it be possible or even sane to invalidate a person’s insurance for failing to declare a housing benefit fine?
Housing benefit overpayment = likelihood of arson by someone else? Where is Franz Kafka when you need him!
This effectively leaves the best part of 7.3 million people without insurance cover, not because of government legislation but because of insurance companies looking to get out of paying on a policy in any way they can. And I invite comments from anyone in insurance to justify the logic of these blanket policies on trivial unspent convictions.
- A mother has an old conviction for shoplifting from 4 years ago whilst suffering from post-natal depression
- A working accountant has a previous conviction when as student they were convicted of urinating in a public place during student rag week.
- A banker has a conviction for dropping litter in public….
come on. How does any of these possible scenarios make a person more of a risk to insure in residential accommodation?
If every single insurer indulged in this blatant rip-off there might be a case to defend, if only by numbers alone but there are insurers who don’t penalise their customers for minor historic infractions of the law:
- Insurable: 0845 0779949 | www.insurable.com
- Fresh Start Insurance: 01733 208278, | http://www.freshstartfinance.com/Buildings-and-contents-insurance
- Anchor Underwriting: 020 3301 3393 | email: peter@anchorunderwriting.co.uk
- Guildhall Brokers: 020 8446 6307 | www.guildhallbrokers.com
- Fairplay Insurance: 01424 222082 | www.fairplayhelp.com
If these companies can set up policies that don’t penalise 7.3 million people why cant Aviva or Direct line?
The Rehabilitation of Offenders Act 1974 sets a time period based on the sentence given that offences must be declared to employers and insurers. Depending on the nature of the offence the time period can be either 6 months or forever.
The legislation is one thing but do ex offenders even know that a trivial conviction needs to be declared to their landlord?
Ex offenders charity ‘Unlock’ is mounting a campaign against the blanket policies of insurers not to offer cover to people with convictions. Luckily the government has plans afoot to deal with this problem. The Law commission has a consultation paper out inviting comments by the 24th June 2010. Hopefully a new law will eradicate this insane practice once and for all.
Ben Reeve-Lewis
About Ben Reeve-Lewis: Ben was the Tenancy Relations Officer for Lewisham Council for 11 years, prosecuting landlords for harassment and illegal eviction. Now he is a freelance housing law training consultant with a more balanced approach, delivering housing law courses for the Chartered Institute Of Housing, Shelter etc. His aim now is to help the housing world work as a interdependent system that benefits all
Simon Parrott says
April 15, 2010 at 8:32 AMVery interesting and concerning topic.
How can a landlord check on a Tenant’s criminal record? Obviously any proposed Tenant is not going to declare a criminal convictoin. I had always assumed that searches against a criminal record were something that were the preserve of the Police and Government bodies. Do private individuals have the right to carry out checks and how can they be obtained?
George Pointon says
April 15, 2010 at 11:56 AMWhat information does the insurer offer to explain the ‘Rehabilitation of Offenders Act,’ as many ex-offenders have no idea that such an act exists. Surely this information must be included on any application form requiring information about spent/unspent convictions, otherwise the question could be construed as bogus.
Ben Reeve says
April 15, 2010 at 8:36 PMIt’s a wierd one this Simon. There are disclosure rules for ex offenders found here http://www.unlock.org.uk/xoffenders.aspx?sid=70
And the National Landlords Association can run basic checks on tenants. See here http://www.landlords.org.uk/services/nlatenantcheck.htm but a private individual cant run a criminal check because of Data Protection even though, as a landlord they could be seriously affected by non disclosure.
My own thoughts on this, and I think they are reflected by ex offender organsations like Unlock, is that would an ex offender necessarily know they had to declare a conviction to a new Landlord? Until I found out about this I would have said it was none of the landlord’s business. Having found out about it I wonder where it leaves a variety of my friends and colleagues who are setting up lettings with private landlords on behalf of a local authority? The Data Protection Act does kick into play for them, particularly an aspect of it called the ‘Caldicott Principles’, which dictate how much information can be shared.
A landlord friend of mine told me that she comissioned her accommodation agency to run a check on a prospective tenant and they told her they had done so but could not disclose specific details of the search results because of Caldicott. I would welcome people’s comments on their experiences in this area.
Personally I think the insurance companies are taking the Mick. As I mentioned in my article how could a fine for housing benefit overpayment automatically lead to an insurance underwriting risk????? It beggars belief.
Let’s hope the governments consultation paper will tip the hand of insurance companies
Ben Reeve says
April 15, 2010 at 9:16 PMOn George’s point, one of the criticisms levelled at insurance companies in this respect is that the requirement to declare is often hidden in the small print, which catches out both landlord and tenant. They are happy to take the premiums and then refuse to pay out on default.
In Michelle Barber’s case I wonder how much they took from her before the claim?
Stephen O'Neill says
April 18, 2010 at 8:58 AMThe Bank of Scotland holds the licence for Aviva and RBS owns Direct Line. Both are to some degree, state owned -or at least heavily subsidised. If it can be argued that they are now public bodies they must not act in a way which is not compatible with the Human Rights Act. Article 8 covers an individuals right to privacy for themselves and their family members. A standard request, depending on the wording, for disclosure of any and all criminal convictions, is arguably incompatible with Article 8. If a bank thinks that the information commissioner, ombudsman or the courts will get to have another look at their agreements and decide whether Article 8 applies I wonder how many of them would not rethink refusing an insurance claim.
Another route for trivial offences could be Regulation 5 of The Unfair Terms in Consumer Contracts Regulations 1999.
Ben Reeve says
April 18, 2010 at 9:58 AMI like the idea there Stephen. I am familiar with Article 8 defences in landlord and tenant law but didnt know Regulation 5 so I just looked it up, “a contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.”
It’s a reasonable argument and maybe worth pursuing if anyone has already been denied a pay out upon it being realised that convictions were not declared. I wonder how or if it could be challlenged as an unfair term that isnt being applied to a specific case.
Article 8 defences caused much consternation last year in the social rental sector in the case of Weaver v. London & Quadrant Housing Association. Wont bore you with the details but since this decision housing associations are to be considered hybrid public bodies in terms of their housing management function, raising the possibility of European Convention on Human Rights defences that previously werent there.
Your RBS argument makes me wonder where Northern Rock stand in this respect with mortgage repossessions, although I have to say in my experience Northern Rock have been the most helpful of the lot when negotiating on someone’s behalf in terms of lender hardship
Ben Reeve says
April 18, 2010 at 10:05 AMOH AND PS.
I noticed, reading in yesterday’s Independant about people stranded by the ash cloud and trying to claim accommodation fees on their insurance are being denied because of the small print nature of the problem…by guess who? Aviva/Norwich Union.
This article shows that at least Directline are doing something
http://www.independent.co.uk/money/insurance/insurers-accused-of-disappointing-response-to-eruption-1947548.html
Stephen O'Neill says
April 18, 2010 at 12:57 PMLord Bingham hinted at how the 1999 Regulation could be used in cases such as this in the case of Director General of Fair Trading v First National Bank [2001] UKHL 52 where he said that clauses which might operate disadvantageously to the customer should be given appropriate prominence. I think it was in the 1950’s when Lord Denning said that some clauses would need to be printed in red ink on the face of the document with a red hand pointing to it before it could be held to be sufficient.
Plainly a clause which places an ongoing burden of disclosure on a customer which could ultimately invalidate an insurance claim should be covered by the ‘red hand rule’.
Stephen O'Neill says
April 18, 2010 at 1:14 PMOn the Article 8 point the Treasury Sub-Committee refer to Northern Rock as a public company (http://news.parliament.uk/2009/01/bank-nationalisation-report/) but a Weaver-type argument might run for the part-owned banks -certainly worth a try if all else fails.