Insurer shuts door after bolt: Phil Dourado explores the grey area that arises in contents cover when someone is working from home

WHEN a bolt of lightning struck Ian Leonard's computer modem, he learnt two things - that lightning can travel down telephone wires and that the insurance industry's view of what constitutes working from home was not the same as his.

'When I tried to claim for a new one, my insurance company didn't know what a modem was, so I had to tell them,' Mr Leonard said. 'We then had an ongoing exchange of letters going into great detail about what I actually did with it.

'Essentially, their view was that it was a piece of business equipment unless I could prove otherwise. I pointed out that I use it to browse around a range of bulletin boards and databases out of general interest, but that I was not connected to any customers via my modem and did not earn any money from it as it was not part of my daily work.'

The modem had cost pounds 900. Mr Leonard, a computer programmer, replaced it with a less sophisticated one, costing pounds 360. He forwarded the bill to Eagle Star as part of a claim under his home contents policy. Eagle Star, however, refused to change its interpretation of his modem as a piece of business equipment. As such, they said, it wasn't covered.

Spare rooms across the country have been filling up with personal computers, modems and even fax machines as equipment designed for the office has worked its way into hundreds of thousands of homes.

British Telecom estimates that by this time next year two and a quarter million people will spend the majority of their working week at home, keeping in touch with the office or with clients via phone, fax and computer. This may overstate the case, as the telecommunications industry traditionally talks up teleworking.

Nevertheless, the flexible work practices of the Nineties appear to be overtaking the insurance industry's traditional neat divide between domestic and business use, leaving a number of areas open to dispute. Different parts of the insurance industry have different views on fax machines, for example.

'I'd say a case could be made for a phone-fax machine being a domestic item and therefore covered by a home contents policy,' a spokesman for Prudential said, pointing out that the phone half of the machine could be its primary function. 'People use faxes for mail order, even to send messages to radio and TV programmes instead of phoning in,' he added.

Eagle Star, however, does not feel that fax machines rank alongside fridge- freezers and washing machines as home accessories. 'It comes down to interpreting changing lifestyles,' said its spokesman, Paul Lock. 'But I'd never expect a fax in the home to be for the primary purpose of anything other than business.'

Rather than gamble on which of these interpretations their home contents insurer will adopt, home office workers have until recently had the option of simply taking out a small business insurance package on top of their domestic insurance.

But, as Sandy Sulaiman, a freelance journalist, discovered, soaring business insurance premiums have made this uneconomic for those with a bare minimum of business equipment. 'My word-processor, fax and a spare printer cost pounds 1,500,' she said. 'Even throwing in my desk, office chair and filing cabinet, I'd be hard pushed to reach pounds 2,000 worth of business equipment in my home office.

'In 1991 I took out a small business insurance package. The premiums only amounted to pounds 52 a year and I thought it was worth it to avoid any arguments with my household contents insurer should I need to claim.

''When my renewal came up this year my broker told me the best deal he could get was pounds 250. I didn't renew because it wasn't worth it. I guess that leaves me uncovered, but I don't know what else to do.'

Paul Lock, of Eagle Star, said: 'For strictly clerical occupations with under pounds 4,000 worth of equipment, we would in most cases extend cover to insure home office equipment at the same rate as the rest of the home contents. Asking your insurer to consider extending cover in this way is always better than just keeping quiet.'

'The basic problem is twofold,' summed up David Dant, of South Bar Brokers, who liaised between Mr Leonard and his insurer over the exploding modem. 'A lot of people don't bother to check with their home contents insurer until they try to claim, when it's too late.

'On the other hand, insurance companies have left the onus on the individual to try to find a solution rather than offer them a package. As a result, an increasing number of people using office equipment at home are not covered.'

ITT London & Edinburgh, contactable through brokers, Link Insurance Services (0622 692002) and Tolson Messenger (081 741 8361) offer specialised home office packages.

(Photograph omitted)