Successfully negotiating claims since 1867
The last few years have seen a number of deprivations of access to justice for both consumer and SME insurance policyholders. The legal aid budget has been reduced to exclude many previously eligible litigants and causes, the reforms of the conditional fee agreement have wiped out the usefulness of that device in contract claims (though we accept that a tsunami of try-on personal injury claims needed corrective action), few lawyers are prepared to enter into damages-based agreements (DBAs) and third party funding is rarely available for claims below a seven-digit figure. That left the Financial Ombudsman Service for aggrieved policyholders. Or, for the tech-savvy, crowd funding.
But the FOS’s rules impose limits on its jurisdiction. The most prominent of these that applies both to private consumers and SMEs is that the award level is a maximum £150,000 subject to the addition at the ombudsman’s discretion of interest and – very rarely – professional fees. The ombudsman can also recommend to an insurer that it pay any sums above the limit, but it is only a recommendation and we know many insurers who are likely to reject – have rejected – such a suggestion.
We at Thompson & Bryan have seen in the last few years an increasing number of cases where the amount in dispute is well in excess of £150,000 and we have had to advise the client on the choice between accepting a sum lower than the loss, or take the risk of litigating for the higher figure.
There are also currently limits on an SME’s eligibility. It can only make a complaint if it has a turnover of not more than €2 million (yes, euro) and fewer than 10 employees. Those rules have been in force for almost eight years during which the financial value has been much eroded and claims have got bigger. It’s therefore gratifying to see that the FCA has taken note of these problems and changes are coming.
From 1 April 2019 the maximum award will be £350,000 (a great improvement but still less than the £500,000 we at T&B had pressed for). This is likely to suffice for most of the consumer and SME cases we handle and is most welcome. SME’s, charities and trusts now have much more inclusive eligibility criteria. They will have to show two things: a turnover not exceeding £6.5 million (no longer the need to wonder what the pound is doing against the euro!) and at least one of a payroll of fewer than 50 employees or a balance sheet below £5 million. This, it is estimated, will open the FOS to another quarter-of-a-million SMEs.
These improvements only apply to cases where the act or omission complained of took place after the effective date, 1 April 2019. For cases relating to actions before that date the limit is increased to £160,000. (Pity. We had had hopes of deferring complaints until after 1 April to get the whole £350,000, but that won’t work!) Each of these limits will have an annual uplift determined by the Consumer Price Index.
We welcome these changes, as we do the FOS’s recruiting drive to cope with additional work. The service has been overwhelmed with PPI claims and it became apparent to us that managing its staff levels to cope meant that insurance expertise was sometimes absent from handlers on our cases. There have also been serious delays in addressing some of the more complex matters, but it does seem to us – and this is anecdotal – that there is some sort of triage system in place now to ensure that the more readily resoluble files get prompt attention and that expert knowledge is becoming more precisely directed.
When a case does present complexity – and this may be because of the interpretation of evidence, the lack of clarity in policy wording, the application of new case law or legislation to the matter – we can greatly help our broker and policyholder clients by a concentrated and detailed analysis and a full and focussed submission to the FOS. Our Complex Claims Division deals exclusively with this sort of work and often we can do it on a no-win-no-fee basis.
You will know that the Insurance Acts of 2012 and 2015 gave much more protection to policyholders in a wide range of issues that had previously given insurers many valid ways to avoid a policy or a claim. These have undoubtedly improved the lot of insurance buyers, but we have found that some insurers – not all – have worked hard to develop ingenious strategies to find a way around the legislated protections. So far, we’ve succeeded with almost every one of those we’ve taken on, despite convincing and determined arguments from insurers and their lawyers.
By the nature of the work, many claims are referred to us when it has already become clear that problems are arising on what had previously been thought to be a straightforward matter. But – an important but – if you have any reservations early on about any element such as policy cover, fair presentation, proportional remedies, a more detailed investigation of your client than you think justified, then call us anyway.
We’ll offer without any obligation free phone advice, we’ll have a look at the documents and work with you and the client as a team on a strategic plan, the chances of success and the costs. That first phone call could avoid a lot of stress later.