Upheld: Travel / life insurance claim disputes complaint against Watford Insurance Company Europe Limited

Decision detail

Summary

Mr B complained that Watford Insurance unfairly avoided his car insurance policy and sought to recover approximately £10,000 it had paid to settle a third party claim from an April 2021 accident. Watford avoided the policy after discovering Mr B had failed to disclose a previous policy cancellation caused by fraudulent card use. The ombudsman found that while Watford was entitled to avoid the policy under the Insurance Act 2015 due to this non-disclosure, it could not recover the third party settlement from Mr B because it lacked the necessary legal or contractual rights to do so, having settled out of court and failed to obtain a consent and indemnity form. The ombudsman upheld the complaint and required Watford to cease recovery action, refund the premium, and pay interest.

The Ombudsman's reasoning

Under the Insurance Act 2015, Mr B was required to make a fair presentation of the risk. The ombudsman found that Mr B would have or ought to have known about the previous policy cancellation and should have disclosed it, making this a qualifying breach. Although the breach was not deliberate or reckless, Watford's underwriting criteria showed it would not have offered the policy at all if aware of the cancellation, entitling Watford to avoid the policy. However, regarding recovery of the third party settlement, Watford settled out of court rather than obtaining a judgment, which meant it lost recovery rights under the Road Traffic Act 1988. Additionally, Watford failed to obtain a consent and indemnity form from Mr B, which is common industry practice. The ombudsman concluded Watford had no legal or contractual right to recover the settlement amount, and the fact that Watford defended the claim for four years suggested it believed there were reasonable prospects of success, meaning Mr B was not always going to be liable for these costs.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website