Taking the legal route against UK insurers explained by specialist law firm, Wright Hassall LLP
This article is for those who are in dispute with their insurers and feel they have nowhere to turn, possibly after being through the insurer’s own internal complaints process and the Financial Ombudsman Service (FOS).
Specialist solicitor, Susan Hopcraft, has kindly provided us with an article for our readers who may be nervous or unsure about taking the legal route against a UK insurer.
What types of insurance claims can be taken down the legal route?
Any. An insurance policy is a contract. You agreed to pay a premium in return for contractual promises, notably that if [x y or z] occurs you will be indemnified by the insurance company for the financial consequences. The terms of that deal are written in the policy and there is no such thing as a ‘standard cover’; each insurer offers whatever terms and definitions it wants. But, if you have a contract and the insurer does not do what it said it would in the policy, then you can claim damages for the breach of contract.
What types of claims are most usual?
The most usual types of disputes with insurers we see are:
- critical illness cover – these are usually high value policies but they are fraught with possible allegations of avoidance for misrepresentation or non-disclosure, given the complexity and subtlety of medical conditions and definitions.
- property claims for physical damage or warranty cover – after a serious fire or flood these claims can run to many tens of thousands; what is covered and the values can be as much an issue as the validity of cover itself.
- household cover for theft of jewellery/valuables – again, these claims can be high value and particularly emotive given the types of loss.
The disputes usually centre on one of two types: (i) that the policy is not valid at all because some relevant information was not provided to insurers pre-placement, or (ii) that the insurer thinks the wording of the policy means they have to pay less than the insured thinks.
The first type of dispute should occur less often since new consumer legislation came into force in 2012 for consumers and 2016 for businesses, but it is always a defence insurers are likely to consider.
At what level of claim is it financially viable to seek legal help?
Claims of less than £10,000 belong in the small claims court. That level of claim does not justify the costs of legal representation and each party bears their own costs.
At less than £25,000 it can be difficult to justify the usual legal costs of bringing a claim but, over that level, there is real merit in instructing a solicitor. If the claim is good then you may be offered a form of no-win, no-fee, although there may be a success fee attached in return for the benefit of not having to pay if you lose and not having to fund a claim as it goes along.
Can I use legal protection on my home insurance to sue an insurer?
Most legal expenses insurances do not cover claims against financial services providers, even fewer against insurers and even fewer are likely provide cover for a claim against the insurer on the same policy that includes the legal expenses insurance. It could happen – and each policy should be checked in case unusual/very old/very new terms apply – but we have not seen it in recent years.
Do time limits apply and what about the broker?
If your complaint is rejected by the insurers you will only have six months to refer the matter to FOS. If you want to claim at court instead you have six years from the breach of contract – usually rejection of the claim. This ought not to pose any difficulty but be aware that if you decide your broker was negligent in the placement (often a natural bedfellow with an insurer refusing to pay!) then you only have six years from placement of the policy to issue a court claim against the broker.
Should I be reluctant to sue an insurance company for fear of not being able to obtain general insurance in the future because I could end up on an “insurance blacklist”?
No. We are not aware that such a list exists and the insurance regulator, the FCA, would take a very dim view of it indeed. Insurers share information to prevent fraud, but that is entirely different from a conspiracy to refuse to consider a customer because they once suggested an insurer had not complied with policy terms.
When should I seek legal advice?
Our experience is that early legal advice pays dividends. We have good success rates at the Ombudsman based on clear presentation of the issues and application of the relevant law and/or regulations. Even if the claim is valued at more than £150,000 which is the FOS compensation limit, if the suggestion is that a policy should be avoided you might, framed a certain way, obtain payment of more than that sum.
The Ombudsman is a low cost/low risk route and ought to be considered in all cases that qualify, but be aware that if you accept a FOS decision that will prevent you from challenging the insurer further or ‘topping up’ damages at court. Legal advice on even a seemingly positive FOS decision may therefore be sensible before it is accepted.
It is not our experience that insurers always take unjustifiable positions just to avoid paying claims, but when claims are made they do review the insurance bargain that was struck to ensure that they only pay out for what they agreed to insure.
On larger claims there is obviously more reason for them to review the information pre-placement and this can have devastating consequences. However, legal advice can redress the balance in bargaining power and with the use of a well presented Ombudsman case and, for strong cases, ‘no-win, no- fee’ funding, all is not lost.