DRN-6230959

The complaint Mr and Mrs S are unhappy with what ARAG Legal Expenses Insurance Company Limited did after they made a claim on their legal expenses insurance policy. Although the policy is in joint names as the claim and complaint have been brought by Mr S I’ll mainly refer to him in this decision. What happened In 2016 Mr S sought assistance with a claim against solicitors (W) who acted for him in an unsuccessful property purchase. ARAG accepted the claim and appointed panel solicitors. The following year those solicitors advised an expert valuation report was unsupportive of the claim meaning it didn’t have reasonable prospects of success. ARAG said it would withdraw cover but would reconsider if Mr S provided a supportive report of his own. It issued a final response to the complaint Mr S made about that decision in April 2018. Mr S obtained a supportive valuation report in 2020 which ARAG reimbursed him for. Counsel’s advice was obtained on the claim in June 2021 which advised it didn’t have reasonable prospects of success. Counsel considered further comments from Mr S and the panel firm but didn’t change his position. ARAG said it wouldn’t provide further cover. Negotiations continued and W made a settlement offer inclusive of costs which Mr S accepted. ARAG sought to recover the expert report costs it paid from Mr S. It later said it wouldn’t be doing so as it had given Mr S inaccurate information about this in October 2022. It agreed it caused Mr S some unnecessary distress and inconvenience and offered to pay £300 in recognition of the impact of that. Our investigator thought it was reasonable of ARAG to rely on the June 2021 counsel’s opinion when withdrawing cover for Mr S’s claim. And she thought the £300 it had now agreed to pay did enough to recognise the impact on him of being wrongly pursued for expert report fees. Mr S didn’t agree. He said the prospects assessment counsel provided was dependent on the valuation evidence previously supplied. That advice had been shown to be factually incorrect and it wasn’t reasonable of ARAG to rely on a prospects assessment which took into account that information. It should have obtained an independent assessment once he pointed out these errors to it. He didn’t agree the £300 ARAG had now agreed to pay was sufficient to recognise the impact on him of failings in relation to recovery of expert fees and the withdrawal of cover for his claim more generally. So I need to reach a final decision. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. The relevant rules and industry guidelines say ARAG has a responsibility to handle claims promptly and fairly. It shouldn’t reject a claim unreasonably.

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ARAG has accepted the claim Mr S wanted to bring fell within one of the insured events his policy contains. So I don’t need to consider that further. However, it’s a condition for cover to be provided that “reasonable prospects exist for the duration of the claim”. And the policy says that means “For civil cases the prospects that you will recover losses or damages (or obtain any other legal remedy that we have agreed to, including an enforcement of judgement), make a successful defence or make a successful appeal or defence of an appeal must be at least 51%. We or a preferred law firm on our behalf will assess whether there are reasonable prospects”. As an insurer isn’t a legal expert we don’t think it’s in a position to carry out that prospects assessment and it should be carried out by a suitably qualified lawyer who has relevant experience. Where that has been done we think it’s reasonable for an insurer to rely on a properly written and reasoned legal opinion when deciding whether a claim has prospects of success or not. ARAG initially withdrew cover in April 2017 based on advice from the panel solicitors (who relied on an expert report) that it didn’t have reasonable prospects of success. That decision isn’t one I’m considering because ARAG issued a final response to Mr S’s complaint about it in April 2018. That said he had six months to refer the matter to our service. Mr S didn’t do so within that timeframe and so those issues aren’t ones I’m considering in this decision. Cover was subsequently reinstated following the supportive opinion Mr S provided from an expert valuer of his own. Mr S is unhappy it was then withdrawn based on the negative prospects assessment counsel provided in June 2021. I’ve reviewed that assessment to see if it’s one ARAG was entitled to rely on. Having done so I think it was. In my view the opinion is properly written and reasoned and from someone suitably qualified; the counsel who provided it specialises in both professional negligence and property litigation claims. Mr S says that advice shouldn’t be relied on because it takes into account valuation evidence previously supplied which had been shown to be inaccurate. I’m not persuaded that is the case. Counsel doesn’t reference the original valuation information in his opinion. He does express reservations about the more recent valuation evidence Mr S obtained (and takes into account relevant case law). But there’s nothing here I think should reasonably have led ARAG to question the advice being provided. The focus of counsel’s advice is in any case not on the valuation but on whether W had been in breach of duty and whether the purchase would have gone ahead but for an identified breach. He concludes it likely wouldn’t. Counsel then considers further points from the panel solicitors (and Mr S) in response and gives clear reasons why that doesn’t lead him to take a different view. I don’t think ARAG was at fault in concluding the requirement for a claim to have reasonable prospects of success hadn’t been met and withdrawing cover as a result. Turning to the issue of costs ARAG has accepted it provided Mr S with inaccurate information about its position on recovery in October 2022. And it’s no longer seeking to recover the costs it paid from him. The outstanding issue is whether the £300 it’s offered does enough to recognise the distress and inconvenience Mr S was caused by it previously seeking to do so. ARAG did send a number of emails advising these amounts needed to be repaid and didn’t initially engage with the arguments Mr S made about what he’d previously been told about this. I accept that will have caused him distress and put him to unnecessary time and trouble over a relatively sustained period. However, I don’t think the nature and extent of that warrants a higher payment than the £300 ARAG has already agreed to pay.

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Mr S says it doesn’t take into account the impact on him of ARAG withdrawing cover for his claim meaning he had to pursue that without the support of his legal expenses policy. I agree it doesn’t but it isn’t intended to. For the reasons I’ve already explained I don’t think ARAG did anything wrong in concluding Mr S’s claim didn’t meet the policy requirement to have reasonable prospects of success and so further funding wouldn’t be provided for it. That means any impact on Mr S as a result of that decision doesn’t result from something ARAG got wrong. It isn’t therefore something it needs to compensate him for. My final decision ARAG Legal Expenses Insurance Company Limited has already made an offer to pay £300 to settle the complaint and I think this offer is fair in all the circumstances. So my decision is that ARAG should pay Mr S £300 (if it hasn’t already done so). Under the rules of the Financial Ombudsman Service, I’m required to ask Mr S and Mrs S to accept or reject my decision before 14 May 2026. James Park Ombudsman

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