RESIDENTS who were left homeless by a massive York flats blaze were celebrating today after insurers agreed to pay out.

Stunned householders from Fulford Place had been faced with huge costs after being told Norwich Union would not cover the cost for another place to rent while repairs were carried out.

But now the company has agreed to stump up the cash as a "goodwill gesture".

The Evening Press previously reported the plight of single mum Kate McCarthy, 33, who was left paying the mortgage for her gutted Fulford Place flat with no more cash to provide shelter for herself and her daughter, Fran, 13. Kate and three other families were caught in a Catch-22 situation because they did not buy their flat from developers Taylor Woodrow, but through a 50 per cent discount deal from the Yorkshire Housing Group.

That meant, according to Norwich Union, that the housing group was the main leaseholder rather than the residents, and therefore they could not claim for alternative accommodation.

But Kate said today she was "delighted and relieved" by the company's U-turn.

"It's fantastic," she said.

"I think Norwich Union were worried about all the bad publicity. It makes an enormous difference."

Ian Rich, area manager for Yorkshire Housing Trust, said they had lobbied Norwich Union on behalf of their residents.

"It's great news," he said.

"We're just really pleased that our leaseholders' accommodation has been covered.

"It has been a difficult time for them, so it was fortunate the insurers had a change of heart."

A spokesman for Norwich Union confirmed that the insurer would now be paying out to the Yorkshire Housing Group residents as "a goodwill gesture".

"We're very conscious that these are exceptional circumstances," he said.

"The most important thing is that we've learned from this. We need to make sure it doesn't happen again."

Leaseholder Dan Adams, who lives with his girlfriend Michelle McCormack, said he was "extremely relieved".

"We've been told the insurance company will now pay about £3,000 towards our accommodation," he said.

"We were so worried that all our savings would be blown on something that wasn't our fault.

"I think the Evening Press coverage helped to make them have a change of heart."

Updated: 10:09 Monday, June 13, 2005