Successfully negotiating claims since 1867
We have given much thought to ways in which we can help once you have a rejection letter from your insurer. There has been much publicity about possible class actions and the Financial Conduct Authority (FCA) has announced that it will start High Court proceedings to get what it describes as legal certainty when it has found a suitable test case. That’s a very welcome move, but with the possibility of appeals, certainty could yet be a long way off.
We are working with a select panel of specialist insurance solicitors. In general, and there are one or two exceptions, class actions are difficult to deal with in contract disputes. The difficulty arises from the wide variety of wordings. For a class action, each claimant has to have the same wording, but we’ve seen policies from the same insurer which differ from each other both in their wordings and in the optional covers chosen. We are happy to introduce individual claimants to our partner solicitors where that is the best route for the individual business.
We have also researched the simultaneous involvement of both FOS and formal legal process. The detail is complex but, in short, if you take the FOS route you still have the legal option open. If you go legal, it could be very difficult to remain eligible for a FOS referral. It’s unlikely that concurrent routes will be of benefit to you.
After much research and discussion with lawyers and the Financial Ombudsman Service we recommend initially FOS referrals for all eligible policyholders. We believe that FOS has distinct advantages over legal action. Essentially, these are:
- Cost: there is currently little certainty on what level legal costs could reach and how the interests of SME policyholders could be adequately funded
- Access: some insurers have arbitration clauses in their policies, meaning that no dispute can go first to court; FOS access is open to policyholders with such clauses
- FOS’s decision criteria are “fair and reasonable”, which may be more favourable than precise nitpicking of a contract wording
- FOS awards interest at 8% on successful referrals, as do the courts
- The formalities are less onerous than in litigation.
You are eligible to go to FOS if:
- Your turnover is less than £6.5 million and either
- You have 49 or fewer employees or
- A balance sheet value on the last filed accounts of £5 million or less.
You should also note that the maximum award FOS can make is £350,000 plus interest, so the ombudsman procedure may not be suitable for potential insured losses in excess of this.
We are happy to act for policyholders who already have from their insurers a final decision letter setting out FOS referral rights. Our initial steps guide will follow in the next post, but in the meantime please do not hesitate to make contact with us using the email address below.