Upheld: unfair policy voidance, settlement valuation dispute, service failure complaint against First Central Underwriting Limited

Decision detail

Summary

Mr M's car was stolen and declared a total loss. First Central offered £13,551.65 settlement, which Mr M disputed as too low. Upon investigation, First Central discovered undisclosed modifications and initially voided the policy, but later changed this to a cancellation and paid the claim. The ombudsman found the settlement valuation fair but the policy voidance unfair because Mr M had taken reasonable care in answering the modifications question and had been misled by the seller. The ombudsman ordered First Central to pay £300 compensation for the two-month delay in payment and trouble caused, add interest to the settlement, and change the cancellation record from insurer-led to consumer-led to remedy the unfair impact on Mr M's insurance prospects.

The Ombudsman's reasoning

The ombudsman found First Central's settlement valuation of £15,350 was fair and reasonable as it was close to the highest motor guide valuation and aligned with FOS approach. However, the ombudsman found First Central's initial policy voidance was unfair because: (1) the modifications question was clear and specific; (2) Mr M took reasonable care in answering it by relying on the seller's representation; (3) First Central itself accepted Mr M had been misled and taken reasonable steps to check; (4) under CIDRA, Mr M did not fail to take reasonable care as a reasonable consumer would have acted similarly. The ombudsman concluded First Central made an error and must restore Mr M's position and compensate him for the impact, including the two-month delay in payment and the cancellation marker affecting his insurance prospects.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website