Partially upheld: claim handling, unfair claim decline, restriction of freedom of choice, alleged conflict of interest complaint against ARAG Legal Expenses Insurance Company Limited
Financial Ombudsman decision DRN-6260608 of 2026-05-19T00:00:00+00:00. claim handling, unfair claim decline, restriction of freedom of choice, alleged conflict of interest complaint against ARAG Legal Expenses Insurance Company Limited. Outcome: Partially upheld.
Decision detail
| Reference | DRN-6260608 |
|---|---|
| Decision date | 2026-05-19T00:00:00+00:00 |
| Firm | ARAG Legal Expenses Insurance Company Limited |
| Product | legal expenses insurance |
| Claim type | claim handling, unfair claim decline, restriction of freedom of choice, alleged conflict of interest |
| Outcome | Partially upheld |
| Remedy | Pay Mr L and Ms M a total of £200 compensation (£100 for delays already offered, plus £100 additional for the unfair initial claim decline and resulting distress and inconvenience). |
Summary
Mr L and Ms M complained about ARAG's handling of a landlord's legal expenses insurance claim after their tenants stopped paying rent. ARAG initially declined the tenant default claim citing unsatisfactory tenant references and restricted Ms M's freedom to use her own solicitor, appointing its panel solicitor instead. The ombudsman found ARAG's initial claim decline was unfair, as ARAG subsequently accepted and settled the claim. However, the ombudsman determined ARAG acted fairly in restricting freedom of choice because legal proceedings had not been issued and no conflict of interest existed with the panel solicitor. The complaint was partially upheld with £200 compensation directed.
The Ombudsman's reasoning
The ombudsman found that ARAG's initial decision to decline the tenant default claim was unfair, as evidenced by ARAG's subsequent acceptance and settlement of the claim. However, the ombudsman determined that ARAG acted fairly in restricting freedom of choice to its panel solicitor because legal proceedings had not yet been issued and preparatory work before proceedings are imminent does not trigger freedom of choice rights. The ombudsman also found no conflict of interest with the panel solicitor, as it was an independent company with its own regulator and had not raised concerns itself. The ombudsman awarded compensation for the avoidable distress caused by the initial unfair decline and acknowledged delays in handling.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| ARAG Legal Expenses Insurance Company Limited, all decisions | 94 | 26% |
Source
Read the original decision on the Financial Ombudsman Service website