Not upheld: mis-selling — alleged misrepresentation of policy terms and underwriter's rights complaint against FMB Insurance Services Ltd

Decision detail

Summary

IIL, a property builder, purchased a new build warranty policy through FMB in 2014. After the property was sold and a water ingress claim was made over 24 months later, the underwriter accepted the claim but pursued IIL for cost recovery. IIL complained that FMB had misled them about the policy's nature and that they would not have purchased it had they known of this possibility. The ombudsman found the complaint not upheld, determining that the policy documentation clearly set out the underwriter's right to pursue third parties for recovery, and as a non-advised sale to a business entity, IIL should have read and understood these terms.

The Ombudsman's reasoning

The ombudsman found that the policy terms clearly set out the underwriter's intention to reserve the right to pursue third parties for cost recovery. As a non-advised sale to a limited company, IIL could reasonably be expected to read and understand the policy terms. The policy documentation explicitly stated that the underwriter's primary obligation was to indemnify the homeowner (the policyholder), not the builder. The ombudsman concluded that nothing in the policy terms could reasonably be interpreted to mean the underwriter would never pursue recovery from a builder or developer, and the explicit reservation of this right in paragraph 9 made the position clear.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website