Upheld: unfair claim decline and policy cancellation complaint against Extracover Limited

Decision detail

Summary

Mr L held a delivery policy with Extracover Limited and claimed after his moped was stolen. Extracover declined the claim and cancelled the policy, citing incorrect information provided at application. The ombudsman upheld the complaint, finding that under the Insurance Act 2015, Extracover failed to demonstrate the breach was 'qualifying' and therefore had no legal basis to decline the claim or cancel the policy. The ombudsman directed Extracover to reconsider the claim, remove cancellation records, and pay £500 compensation for distress and inconvenience. Both parties accepted the provisional decision.

The Ombudsman's reasoning

The ombudsman applied the Insurance Act 2015, which requires an insurer to demonstrate that a breach of fair presentation of risk is 'qualifying' before taking action. A qualifying breach means the insurer would have acted differently had correct information been provided. Extracover failed to provide evidence that they would have declined the policy or claim had they received correct information. Therefore, under the IA, Extracover had no remedy available and should not have cancelled the policy or declined the claim. The ombudsman rejected reliance on the fraud clause in the policy terms, as the incorrect information did not constitute fraud. The ombudsman also found the claim was not handled well and awarded compensation for distress and inconvenience.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website