Not upheld: withdrawal of cover based on prospects assessment; allocation of solicitors' costs to indemnity limit; costs assessment process complaint against ARAG Legal Expenses Insurance Company Limited (trading as DAS)
Financial Ombudsman decision DRN-6132383 of 2026-04-27T00:00:00+00:00. withdrawal of cover based on prospects assessment; allocation of solicitors' costs to indemnity limit; costs assessment process complaint against ARAG Legal Expenses Insurance Company Limited (trading as DAS). Outcome: Not upheld.
Decision detail
| Reference | DRN-6132383 |
|---|---|
| Decision date | 2026-04-27T00:00:00+00:00 |
| Firm | ARAG Legal Expenses Insurance Company Limited (trading as DAS) |
| Product | legal expenses insurance |
| Claim type | withdrawal of cover based on prospects assessment; allocation of solicitors' costs to indemnity limit; costs assessment process |
| Outcome | Not upheld |
| Remedy | No new remedy ordered. The ombudsman confirmed the £300 compensation already paid by ARAG for delay in communication was reasonable. The ombudsman did not make any direction regarding the indemnity limit or costs assessment, noting that costs have not yet been assessed and Mrs S can request details from D and challenge any assessment if required. |
Summary
Mrs S and Mr S claimed on their legal expenses insurance policy for a neighbour dispute. After D stopped acting due to relationship breakdown, ARAG appointed L to assess prospects. L concluded in March 2024 that prospects were less than 51% and ARAG withdrew cover, though it authorized L to attempt settlement negotiations. The claim was struck out in June 2024 with costs awarded against Mrs S. Mrs S complained that ARAG acted unfairly by withdrawing cover based on L's assessment, that L's costs should not count towards her indemnity limit as L only assessed prospects for ARAG's benefit, and that she should have input into the costs assessment. The ombudsman rejected these complaints, finding ARAG was entitled to rely on L's professional assessment, that both solicitors' costs should count towards the indemnity, and that ARAG was not responsible for the claim being struck out.
The Ombudsman's reasoning
The ombudsman found that L's March 2024 letter was a clear assessment that the case lacked reasonable prospects of success, not merely initial thoughts. The ombudsman rejected Mrs S's argument that ARAG should have identified flaws in L's advice, finding this would extend beyond ARAG's remit as an insurer. The ombudsman determined ARAG was entitled to rely on L's professional advice and withdraw funding accordingly. Regarding the panel solicitors' costs, the ombudsman found that L's assessment costs were reasonably part of representation costs when transferring the case, and D's costs for work reasonably carried out before ceasing to act should count towards the indemnity. The ombudsman found no reliable evidence that ARAG was responsible for the claim being struck out and considered the delay in communicating the funding position, while not ideal, did not impact the case outcome.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| ARAG Legal Expenses Insurance Company Limited (trading as DAS), all decisions | 2 | 0% |
Source
Read the original decision on the Financial Ombudsman Service website