Misrepresentation, Non-Disclosure and Breach ... - Law Commission

One of the principal reasons that we decline to look at a case
is that we regard it as more suitable for a decision in the
courts. This is frequently the case where the assessment of
the evidence requires cross-examination of third parties. This
creates a whole category of cases to which our process is
unsuited.
In declining to consider such cases, due perhaps to their
reliance on the evidence of a third party (which may include a
broker or intermediary or the departed salesman or
representative of a firm), we must accept that, in relation to
non-disclosure, the effect of a referral to the courts is that the
case will be decided upon an entirely different basis.
This basis is one that we do not regard as fair or reasonable
or as representing good practice in the sector. In other words
if the insurer can justifiably demand that they are able to
cross examine a third party then they may win a nondisclosure
case that they would otherwise have lost at the
FOS.
3.60 If the FOS will not deal with the case, then the consumer must go to court. The
court will apply the strict letter of the law, unless the consumer goes to the
difficulty and expense of showing that the insurer was in breach of the FSA Rules
and makes a claim for breach of statutory duty. Even that may be less
satisfactory than a claim under FOS, since the FSA Rules are less demanding of
the insurer.
3.61 Further many consumers who think their claim has been unfairly rejected do not
make a complaint to the FOS. 32 Consumers should know that the FOS exists
because policy summaries must refer to it. 33 However, they do not know how the
FOS will approach their case. Consumers may be told what their legal rights are
and decide there is nothing they can do. They are unlikely to realise that the FOS
will apply very different and much more favourable rules.
3.62 So our first concern is that claims are still being dealt with under the strict law and
by no means all cases will get to the FOS. There are consumer insureds whose
claims are not being paid when generally accepted good practice and the FOS
guidance suggest that they should be.
32 For example, in 2004, the Legal Services Commission interviewed over 5,000 people, of
whom 45 said they had an insurance claim rejected unfairly. Only three people had
contacted the ombudsman. Most people had either done nothing, or had attempted to
handle the issue on their own (Information provided by the Legal Services Commission).
Furthermore, figures produced by the FOS suggest that some socio-economic groups are
much less likely to use their service. For example, FOS complainants are more likely to
read the Daily Mail, Times or Telegraph than to read the Sun: see Financial Ombudsman
Service, Annual Review 1 April 2005 to 31 March 2006, pp 43-48.
33 Insurance Conduct of Business, Rule 5.5 requires the summary to state “(11) how to
complain to the insurance undertaking and that complaints may subsequently be referred
to the Financial Ombudsman Service or any other applicable named complaints scheme.”
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