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Insurance Law and the Financial Ombudsman Service

10 MEASUREMENT OF LOSS, ABANDONMENT AND SALVAGE INSURER’S OPTION TO REPAIR, REINSTATE, REPLACE OR OFFER A CASH SETTLEMENT Reasonableness 10.1 Most household policies allow the insurer to opt to repair, replace, reinstate or offer a cash settlement to deal with the claim. The FOS says that the insurer must exercise this power reasonably, in the circumstances of the individual case. In Case Study 58/5, 1 following expert evidence and photographs of the units, the FOS found that it was not reasonable for the insurer to opt for repair instead of replacement. This requirement of reasonableness is a welcome feature which is not present in the law unless required by the wording of the policy.

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