The eligibility criteria for escalating complaints to the Financial Ombudsman Service (FOS), including insurance claim disputes, altered on 1st April 2019. Key definitions and the revised position are set out below.

Definitions

An eligible complainant before 1 April 2019 is:

• a business which has a turnover or annual balance sheet that does not exceed €2 million and employs fewer than 10 people
• a charity with an annual income of less than £1 million
• a trustee of a trust that had a net asset value of less than £1 million

An eligible complainant from 1 April 2019 is:

• a business which has an annual turnover of less than £6.5 million and either:
  • has a balance sheet of less than £5 million; or
  • employs fewer than 50 employees
• a charity with an annual income of less than £6.5 million
• a trustee of a trust that had a net asset value of less than £5 million

Financial Limits

The FOS can tell insurers to compensate the insured for the full amount of their loss.

However, the FOS only has power to enforce payment up to a capped amount. If the loss value is in excess of the capped amounts, the FOS can only recommend payment of the excess amount but not enforce the payment.

The capped limits are:

• For a complaint from an eligible complainant that both occurred and was referred to the FOS before 1st April 2019: £150,000
• For a complaint from an eligible complainant that occurred before 1st April 2019 but was referred to the FOS after that date: £160,000
• For a complaint from an eligible complainant that occurred after 1st April 2019: £350,000

The maximum award limits will be increased annually on 1 April for inflation, in accordance with the Consumer Prices Index, starting from 1 April 2020.

Time Limit

In most cases, for the FOS to consider a complaint, it must be submitted to the FOS within six months of the final response letter.

For further information visit the FOS website:

https://www.financial-ombudsman.org.uk/businesses/resolving-complaint/understanding-compensation

On Thursday 4th May 2017 our SIG sponsor, Edwin Coe LLP, kindly hosted an afternoon seminar on the subject of the Enterprise Act 2016. Michael Whitton, Partner at Edwin Coe LLP, gave a review of the concept of damages for late payment and provided an introduction to this new law giving policyholders the right to claim damages for delay in the settlement of claims.

The Enterprise Act 2016 to boldly go where no Act has gone before

The Financial Conduct Authority (FCA) has recently updated its rules on complaints handling; this is likely to affect members of this SIG and a brief summary of the provisions may be useful. This summary should not be seen as a substitute for study of the FCA handbook DISP.1 and DISP.2 sections which detail the new regime.

https://www.handbook.fca.org.uk/handbook/DISP/INTRO/?view=chapter

Financial Ombudsman Service (FOS)

The Rules place much emphasis on the role of the Financial Ombudsman Service (FOS). Regulated firms are required to make reference to the FOS and give its website address on their own websites and in their conditions of contract. This must be done at the point of sale. Businesses must maintain familiarity with FOS determinations, distribute such to all those likely to deal with complaints, and include these in training programmes for complaint handlers.

Complaints resolution rules

All complaints are to be handled diligently, fairly, consistently and impartially, and all determinations are to be in writing in terms that are clear and not misleading.

https://www.handbook.fca.org.uk/handbook/DISP/1/4.html

At the point of sale the business must detail its own procedures for complaint handling, procedures that have to be effective and transparent, reasonable and prompt. Internally, a senior official must take responsibility for compliance with the complaints rules and processes.

A complaint is any expression of dissatisfaction from any affected party, including others than the client. Essentially, this means that if the complaint relates to the insurer or the adjuster, this is still a complaint that must be addressed. There are detailed obligations for the recording, analysis and pattern analysis of complaints in a form set out in the DISP handbook.

The period for resolution of disputes capable of quick determination has been extended to three days, rather than the previous one. But all resolutions must now be communicated in writing.

The regime reflects a number of reviews carried out by the FCA and other organisations, in which the handling of complaints by many regulated businesses was found to be deficient and not in the consumers’ interests. It’s clear that the FCA will be paying very careful attention to the procedures and recording of all regulated businesses of whatever size. We recommend careful study of the rules.

May 2017

We are indebted for the content of this article to our SIG sponsor, Edwin Coe LLP, who acted for Western Trading in the case of Western Trading Limited v Great Lakes Reinsurance (UK), on which the Court of Appeal handed down its judgment at the end of October. Much of what follows has been taken from Edwin Coe’s seminars on the case in November 2016 (London), April 2017 (Leeds) and June 2017 (Glasgow).

Insurers had initially raised two defences to the claim. The first was an absence of insurable interest: at all times the freehold owner of the building was a Mr Singh, who was also the owner of the tenant, Western Trading. There was a complex network of relationships within Mr Singh’s businesses, but in all respects Mr Singh was the equitable owner of all interests. The first instance judge ruled that as such arrangements were not unusual, and as the Claimant company had to account to Mr Singh for the property, this defence would fail. Insurers did not appeal that decision.

The second defence was that the Claimant had suffered no loss because reinstatement had not taken place, and there had been no diminution in market value (DMV). The policy specified that the basis of the amount payable should be the reinstatement of the damage with the policyholder able to choose to reinstate on another site and in any manner suitable to the policyholder’s requirements. Insurers argued that there was no financial loss as, amongst other arguments, the value of the site had been enhanced by the fire.

The Court of Appeal upheld the first instance judgment in two important respects: where the terms of the policy and the intentions of the policyholder are clear, as in this case, the amount payable is the cost of reinstatement and diminution – or increase - in value is not a factor; any time limitations in the policy do not start to run until insurers have admitted liability.

This is inevitably a simplification of a case with much more complexity, but which serves to merit re-examination of those claims where the measure of loss, particularly reinstatement, is in issue. The exact circumstances are important and Edwin Coe offer help to all CILA members.