Insurance And Reinsurance - Weekly Update - 15 January 2013

A summary of recent developments in insurance, reinsurance and litigation law.

These updates are aimed at keeping you up to speed and informed of the latest developments in caselaw relevant to your practice.

THIS WEEK'S CASELAW

Clark v In Focus Asset Management

Whether claimant can accept FOS award and pursue further losses in the courts

http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/QB/2012/3669.html&query=title+(+clark+and+focus+)&method=boolean

The Financial Ombudsman has the power to award compensation of up to £150,000 (where a complaint has been made on or after 1 January 2012 – complaints made before that date are subject to a compensation limit of £100,000). Under FSMA 2000 and the FSA's Handbook (Dispute Resolution: Complaints), a complainant can choose to reject or accept an award. Section 228(5) of FSMA provides that "if the complainant notifies the ombudsman that he accepts the determination, it is binding on the respondent and the complainant and final".

In Andrews v SBJ Benefit Consultants [2010], a judge in the Chancery Division of the High Court held that the merger doctrine applies where a claimant has accepted an award from the Financial Ombudsman, so that he cannot claim for additional losses above the Ombudsman's limit in civil proceedings before the courts. However, in this case, Cranston J has held that the merger doctrine does not apply and that Andrews was wrong on this point. He held that there is nothing wrong with a complainant using his award from the Ombudsman to finance his legal costs in bringing court proceedings to recover a greater amount (above the level of the Ombudsman's limit). The term "final" in this context merely means the end of the Ombudsman's process.

COMMENT: Last year, the Ombudsman Service received some 180,000 complaints related to insurance products (of which over 155,000 related to payment protection insurance) and so the issue of finality will be of importance to many insurers. There are now two conflicting High Court decisions on this issue and, as a result, clarification as to the correct position will be needed from the Court of Appeal. It remains to be seen whether this decision will be appealed.

Insight Group v Kingston Smith

Substitution of the name of a defendant after expiry of the limitation period

http://www.bailii.org/ew/cases/EWHC/QB/2012/3644.html

The claimants commenced proceedings against an LLP but it had no liability for wrongful acts committed by the partners of a firm prior to formation of the LLP. Although the...