A southern farmer’s family lost their home and one of their outbuildings in a storm and resulting fire in July 2016. The insurer deducted the wear and tear of the buildings twice – first when entering into the insurance contract and then when calculating the amount of the loss. In this way, according to the Financial Ombudsman, he understated the payment due. The Courts deciding in this case have shared the insurer’s view. The Financial Ombudsman files an extraordinary complaint.
The case concerns a storm fire at buildings forming part of a farm run by a farmer in southern Poland. The event took place in July 2016. As a result, two of three buildings on the farm were destroyed. Among them was an outbuilding from the 1980s and the only residential building from the 1920s. The owner of the farm had a valid insurance for all buildings, so he hoped for a fair, contractually compliant compensation payment.
However, the insurer, in determining the amount of the loss, again deducted the degree of wear and tear on the buildings, which led to a situation of double estimation of value. In fact, the first deduction occurred when the insurance premium was calculated and the contract was entered into. As a result of the application of such a mechanism of damage calculation, the injured farmer, instead of nearly PLN 80 thousand of compensation, received from the insurer only slightly more than half of that sum. Since the insurer insisted, the farmer decided to pursue his rights in court.
The courts deciding this case agreed with the insurer, stating that taking into account the degree of wear and tear of the building at the stage of determining the extent of the loss allows the extent of the damage suffered to be determined in accordance with the actual state of affairs.
The Financial Ombudsman, after examining the case files, decided to file an extraordinary complaint, bearing in mind the need to provide protection to an insured who had not been paid full compensation as a result of damage to buildings forming part of an agricultural holding.
– If the method of calculating the amount of damage presented in the judgements which form the basis of the present appeal were to be applied, which consists in deducting again from the amount of damage the degree of wear and tear of the buildings, it would lead to a situation of double estimation of value, and as a consequence it would lead to an understatement of the compensation due, which by its nature is supposed to fulfil the compensatory function – observes Prof. Dr. Habil. Mariusz Golecki, the Financial Ombudsman.
In the view of the Financial Ombudsman, the judgement of the Regional Court is in conflict with the provisions of law applicable to the contractual relationship between the parties to the dispute, thus a breach of Article 2 in conjunction with Article 7 and Article 32 of the Constitution was alleged. The content of one of the indicated norms, namely Article 7 of the Constitution requires the authorities to act on the basis and within the limits of the law. This gives rise to a legitimate expectation on the part of the citizen that the public authority, including the court issuing the judgement, will correctly apply the law. Article 2 of the Constitution, on the other hand, establishes the principle of a state of law implementing the principles of social justice.
– This principle is directly related to the principle of legal security and social justice, which should effectively protect people’s welfare and interests – adds Mariusz Golecki.
In the view of the Financial Ombudsman, the judgement issued by the Regional Court, taking into account the reduction of compensation by double application of technical wear and tear, deprived the Insured of the compensation due to him and, consequently, deprived him of the possibility to run his agricultural holding in an undisturbed manner.
The Financial Ombudsman requested that the contested judgement of the Regional Court be reversed and that a decision be made on the merits of the case in accordance with the lawsuit.
