Arguing until Blue(fin) in the face: Court tells FOS that beneficiaries under a D&O policy are not consumers
The Financial Ombudsman Service has suffered a major defeat in the Administrative Court which will come as a relief to D&O insurers and brokers.
D&O insurance is regarded in the market as commercial and not a retail line of business. However, a decision by FOS that a director claiming in a personal capacity as an insured under a D&O policy was a consumer and therefore was an "eligible complainant" threatened to open the entire market to FOS jurisdiction.
Those new to the issues raised by R (on the application of Bluefin Insurance Services Ltd) Financial Ombudsman Service Limited  EWHC 3413 (Admin) should read my colleague Robbie Constance's blog. In brief, the former director of a company faced claims by an investor for allegedly dishonest misrepresentations and for breaches of personal covenants at the time of the company's fund-raising. The former director, Mr Lochner, claimed that he notified his brokers of the claim and that they had failed to notify the company's D&O insurers who thereafter rejected the claim. Mr Lochner subsequently complained to FOS about the alleged failure to pass on his notification.
In his keenly anticipated judgment, published on Monday, Wilkie J held that (i) whether or not FOS has jurisdiction to consider a complaint is a matter of "precedent fact", an objective issue that can be considered by the courts and (ii) a director claiming under a D&O policy for indemnity for personal liabilities arising out of his/her activities as a director is not a consumer for the purposes of the DISP rules.