Not upheld: claim decline and claims handling complaint against Society of Lloyds (Lloyds)

Decision detail

Summary

E, a limited company, claimed on its business protection insurance policy with Lloyds following a power incident in April 2023 that damaged two specialist machines. After initially attempting repairs, E claimed approximately £1.87 million in business interruption losses based on specific projects it said would have generated significant revenue but for the equipment damage. Lloyds appointed forensic accountants who concluded the projects would not have proceeded regardless of the damage due to other factors: one client's insolvency, another client's unrelated issues, and a third project's speculative nature pending unlikely planning permission. The ombudsman found Lloyds acted fairly and reasonably in relying on the forensic accountants' findings and declining the business interruption claim, as E had not provided expert evidence to challenge their conclusions. The ombudsman also found no significant avoidable delays in claims handling and found it reasonable for Lloyds to decline interim payments while the claim remained disputed.

The Ombudsman's reasoning

The ombudsman applied the principle that insurers must handle claims promptly and fairly and should not reject claims unreasonably. However, where an insurer obtains expert opinion, the ombudsman's role is to determine whether the insurer acted fairly and reasonably based on that evidence, not to substitute its own judgment for the expert's findings. The ombudsman found the forensic accountants' report persuasive as it identified specific reasons why each claimed project would not have proceeded regardless of the equipment damage: one client became insolvent due to investment problems unrelated to the damage, another project failed due to client issues unrelated to the damage, and a third was speculative pending planning permission unlikely to be granted within the indemnity period. The ombudsman noted E did not provide its own expert evidence to challenge these conclusions and found some of E's arguments had not been previously presented to Lloyds. Regarding increased costs of working, the ombudsman found Lloyds reasonably concluded these were not additional expenditure as E had incurred similar costs prior to the damage. On interim payments, the ombudsman found it reasonable for Lloyds to decline them where the claim itself had not been accepted and the position remained unclear until the forensic report.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website