Our client, a care home operator, came to us when they were told that they had no insurance for a number of personal injury claims that had been made by their customers and residents.
Their insurance brokers said that the first claim was not covered because it fell outside the relevant policy period and had been notified too late.
The second claim, they said, was not covered because the insurer had gone into insolvent liquidation.
We investigated and also made sure that our colleagues protected the position on the active claims. Our client should have had insurance cover to pay for defence costs but we stepped in to defend the personal injury claims. The legal costs could easily have outstripped the value of the claims themselves and urgent work was needed to defend them.
As to the insurance coverage issues, in our view the insurance broker had misunderstood the policy terms for the first claim. They had also mishandled the claim notification process. After we intervened, insurers agreed to indemnify our client.
The second claim proved more complicated but it appeared to us that the broker had been negligent in recommending an unregulated insurance company that was based abroad, and one which was known to have financial security concerns. The insurer went into administration shortly after the policy started. The worries over the security of the insurer were well publicised and a reasonably competent insurance broker ought to have known that. We therefore claimed against the broker for their professional negligence in placing liability cover for our client with an unreliable insurer. We claimed not only defence costs but also for the damages that our client might have had to bear in the absence of valid insurance cover.
We succeeded in recovering the client’s losses, plus the legal costs of their professional negligence claim, without having to issue legal proceedings. The client was not eligible to refer the complaint to the Financial Ombudsman but, under the new rules that came into force in April 2019, they might have been eligible. It would have been useful to have that option alongside the threat of court proceedings.