Not upheld: Home insurance claim disputes complaint against ARAG Legal Expenses Insurance Company Limited

Decision detail

Summary

Mr S and Mrs S complained to the FOS about ARAG's decision to decline a legal expenses insurance claim relating to an employment dispute. ARAG declined the claim because the incidents giving rise to it started in September 2022, before the policy commenced in August 2023. The ombudsman found that while Mr S's employment termination occurred after the policy started, the underlying dispute began with an incident in September 2022 that triggered unfavourable treatment. By August 2023, Mr S was aware of the unresolved employment dispute when he took out the policy. The ombudsman concluded it was fair for ARAG to decline the claim based on the policy exclusion for events occurring before the policy start date, as legal expenses insurance is designed to cover uncertain future risks, not pre-existing disputes. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that legal expenses insurance is designed to cover uncertain future risks, not pre-existing or inevitable events. The policy terms require the date of occurrence to be during the insured period. The evidence showed that the series of events giving rise to the claim began in September 2022 when Mr S experienced unfavourable treatment following an incident, which pre-dated the August 2023 policy start. Although the termination occurred after the policy commenced, it was the culmination of a long-running dispute that began before cover started. Critically, Mr S was aware of the unresolved employment dispute at the point he took out the policy in August 2023, having already experienced exclusion from meetings and travel. Therefore, it was fair for ARAG to decline the claim based on the pre-policy date of occurrence exclusion.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website