A shock High Court ruling on the payment of additional compensation to clients for negligent advice could be overturned in the Court of Appeal, leading the way to greater certainty about professional indemnity insurance for financial advisers.
The long-running case, reported in Brunel News in March 2013, concerns Mr and Mrs Clark who sued their financial adviser, In Focus Asset Management & Tax Solutions, for additional compensation having already accepted an award from the Financial Ombudsman (FOS). It had previously been accepted that a FOS award prevented claimants from pursuing their financial advisers for additional compensation, however the High Court ruling had allowed the Clark’s case to proceed.
Now a landmark appeal heard on 22 October could overturn the High Court decision. Judgement was expected to be handed down before Christmas.
Alistair Schaff of barristers’ chambers 7 King’s Bench Walk, who acted for In Focus, warned that the High Court decision could allow people to use the FOS as a stepping stone to further litigation, throwing the professional indemnity market into disarray. However, the Clark’s barrister, Clive Wolman of 11 Stone Buildings, argued that complaints to the FOS are not set out in specific enough terms to qualify as causes of action.
The High Court ruling in December 2012 has already had an impact on the professional indemnity market for financial advisers. Law firm Hill Dickinson says that “there has been more interest among financial advisers and their insurers in exploring the possibility of settling cases on a full and final basis before going to the FOS.”
James Burgoyne, Director, Brunel Professional Risks, said “We are following the appeal closely so that we can keep our IFA clients fully updated of the implications for their PI insurance cover. The best possible outcome for IFAs and insurers would be for the Court of Appeal to find in In Focus’ favour which would give the PI market certainty that an FOS ruling would be the end of the matter.”
Whilst the decision was anticipated before Christmas, it is still awaited.