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ombudsman news

issue 4

April 2001

case studies - legal expenses

Many of the legal expenses complaints we consider involve employment or property disputes. The following is typical of the complaints we receive concerning property disputes.

legal expenses - policy covering "acts any affecting policyholder's legal rights" - policyholder claiming cover to determine his legal rights - whether claim valid.

When Mr and Mrs G bought their house in July 1997, they found their drive obstructed by a fence panel which their neighbours had erected. They could not reach agreement with their neighbours as to the correct boundary and, in February 2000, the neighbours issued proceedings.

Mr and Mrs G notified their legal expenses insurer that they were claiming indemnity for their legal costs. The insurer rejected their claim, stating that the policy only covered "any act which affects [their] legal rights arising out of or to do with [their] living in or owning [their] home". The insurer contended that until Mr and Mrs G had proved that their rights had been affected by the neighbours' action, it had no liability to provide any indemnity.

complaint upheld
If the court decided that Mr and Mrs G were wrong, then it could not be said that the neighbours' act had affected their legal rights. Nevertheless, it could not be correct that cover only operated after the issue in dispute had been determined.

The insurer was, of course, entitled to receive sufficient evidence to show that a "prima facie" case existed, but in our view the policyholder could establish his "rights" by producing evidence, such as documents, before the case had come to court.

In this instance, in April 2000 the policyholders' solicitor had sent the insurer documents which established that Mr and Mrs G had a prima facie case, and the insurer had not explained why the claim was not covered. We upheld Mr and Mrs G's complaint and the insurer agreed to provide indemnity for all "reasonable and necessary costs" they had incurred since 28 February 2000, the date when it had rejected the claim.

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.