Upheld: wrongful recovery action and claims handling — refusal of indemnity cover complaint against Tradex Insurance Company PLC

Decision detail

Summary

Mr R held a taxi insurance policy with Tradex and was involved in an accident while driving a vehicle registered in his name but which he did not legally own. Tradex refused his claim for vehicle damage due to lack of insurable interest, a decision upheld by a previous FOS ombudsman. However, Tradex settled a third party claim against Mr R for £17,126.68 and then pursued recovery action against him. The ombudsman upheld Mr R's complaint, finding that the policy terms provided cover for third party liability based on vehicle registration rather than ownership, meaning Tradex was obliged to settle the claim and had no recovery rights. Tradex was ordered to cease recovery action, remove debt records, and pay £400 compensation for distress and inconvenience.

The Ombudsman's reasoning

The ombudsman found that although Mr R may not have had an insurable interest in the vehicle (legal ownership), the policy wording only required the vehicle to be registered to him for third party liability cover to apply. The policy definition of 'vehicle' included vehicles registered by the policyholder, and the liability section covered legal liability arising from driving the insured vehicle. Therefore, Tradex was obliged to settle the third party claim under the policy terms, not just under Road Traffic Act obligations, and had no right of recovery against Mr R. The ombudsman rejected arguments that lack of insurable interest prevented coverage for third party liability claims.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website