Partially upheld: Motor insurance, claim handling complaint against ARAG Legal Expenses Insurance Company Limited

Decision detail

Summary

Mr C and Mrs C complained that ARAG Legal Expenses Insurance Company Limited unfairly handled their legal expenses insurance claim by refusing to fund expert evidence required to assess a potential nuisance claim against their County Council. ARAG initially refused to cover expert costs, forcing Mr C to arrange and fund the expert himself, and offered £150 compensation. Mr C subsequently claimed that his law firm's professional legal work should be indemnified under the policy. The ombudsman upheld the complaint in part, finding ARAG's refusal to fund expert evidence was an error and requiring ARAG to refund those costs. However, Mr C's claim for indemnity of his law firm's work was rejected as falling outside the scope of the complaint (limited to matters up to ARAG's 28 July 2025 final response). The ombudsman upheld ARAG's £150 compensation offer as fair and reasonable for distress and inconvenience, rejecting Mr C's claim for compensation at his preferred hourly rate.

The Ombudsman's reasoning

The ombudsman established that the complaint scope was limited to matters up to ARAG's final response date of 28 July 2025, as subsequent issues would require a separate complaint and fall outside the ombudsman's claim-handling role. ARAG's initial refusal to cover expert evidence costs was an error, and ARAG has now agreed to cover reasonable costs. However, Mr C's later claim that his law firm's professional legal work should be indemnified represents a shift from his original complaint about lost professional time and falls outside the temporal scope. Regarding compensation for distress and inconvenience, while Mr C did expend reasonable effort over several weeks to progress expert evidence and experienced frustration, the ombudsman rejected compensation at Mr C's preferred hourly rate, instead assessing the impact of ARAG's error on the complainant. The ombudsman noted Mr C had considerable experience as a solicitor, had already engaged in pre-action conduct before claiming, and had made choices regarding panel solicitors that contributed to delays. The £150 offered by ARAG was deemed fair and reasonable.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website