FOS ruling creates confusion

The Financial Ombudsman Service has demonstrated that it will rewrite even clear terms of insurance ...

The Financial Ombudsman Service has demonstrated that it will rewrite even clear terms of insurance policies if it considers them to be unfair, according to Jonathan Davies, a partner at law firm Reynolds Porter Chamberlain.

Speaking at the annual conference of the British Insurance Law Association, Mr Davies alluded to the Ombudsman's decision this summer that an insurer should pay a consumer's claim for damage to a TV aerial under a building insurance policy - even though the policy clearly excluded damage to the aerial. He said even though the claim was very minor in value, it sets an unfortunate precedent.

"The effect of the judgement is to introduce considerable unpredictability to insurance," he commented. "If even clear policy wordings can be overruled by the Ombudsman, how can insurers and policyholders know what is and is not covered?"

Mr Davies explained that it is universal insurance practice for TV aerials to be treated as contents and, therefore, not covered by buildings insurance.

When his TV aerial was damaged in a storm, the client attempted to claim for the aerial under the buildings policy and the claim was declined by his insurers.

The Ombudsman, however, accepted that the policy wording was clear and that it accorded with widespread industry practice, but held that the policy term was neither fair not reasonable and ordered the insurer to pay.

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