Upheld: unfair claim denial and poor claims handling complaint against RAC Insurance Limited
Financial Ombudsman decision DRN-6067773 of 2026-05-16T00:00:00+00:00. unfair claim denial and poor claims handling complaint against RAC Insurance Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-6067773 |
|---|---|
| Decision date | 2026-05-16T00:00:00+00:00 |
| Firm | RAC Insurance Limited |
| Product | Motor insurance |
| Claim type | unfair claim denial and poor claims handling |
| Outcome | Upheld |
| Remedy | RAC must: (1) Arrange and pay for Mrs D's vehicle to be repatriated as soon as possible in line with policy terms; (2) Refund Mrs D's additional costs (accommodation and alternative travel) in line with remaining policy terms; (3) Add 8% simple interest per year from date of payment to date of settlement; (4) Pay £500 to reflect distress and inconvenience caused by its handling of the claim. |
Summary
Mrs D held a European breakdown policy with RAC. When a yellow warning light appeared on her dashboard while preparing to drive back to the UK with three children, she consulted the manufacturer handbook and drove to a qualified dealership for her vehicle make, which conducted a brief assessment and advised her to contact her insurer. RAC initially declined the claim on the basis that the vehicle was already at a garage, despite the UK customer care team determining the claim should be accepted and requesting European colleagues to accept it. After six hours of calls during which RAC reversed its decision without explanation, Mrs D was forced to arrange accommodation and alternative transport home, leaving the vehicle overseas. The ombudsman found RAC's reliance on the policy exclusion was unfair given Mrs D's reasonable and safety-conscious actions, and ordered RAC to repatriate the vehicle, refund costs, and pay £500 for distress and inconvenience.
The Ombudsman's reasoning
The ombudsman found that while policy terms state RAC will not cover claims where the vehicle is already at a garage, these terms exist to avoid prejudicing claims through external involvement. However, Mrs D's actions were reasonable and understandable: she sought expert advice from the manufacturer handbook and a qualified dealership when a warning light appeared, drove to safety for her children, and the dealership only conducted a basic assessment without attempting repairs. The dealership correctly advised her to contact her insurer. The ombudsman was satisfied that Mrs D's actions did not prejudice RAC's position or compromise the claim. The ombudsman was particularly concerned that the UK team agreed the claim should be accepted and asked European colleagues to accept it, but the European team reversed this decision without adequate explanation, causing additional distress. The ombudsman concluded RAC's reliance on the policy exclusion was unfair in these circumstances.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| RAC Insurance Limited, all decisions | 226 | 34% |
| Motor insurance, all decisions | 23,874 | 35% |
Source
Read the original decision on the Financial Ombudsman Service website