Oval blunders lost us millions in professional indemnity payouts, claims client
Ocean Finance is suing Gallagher-owned broker Oval for £4.6m over allegedly giving poor advice about compensation for payment protection insurance (PPI) customers.
According to Ocean, the blunder meant it could not recover enough money from its professional indemnity (PI) insurers to cover what it paid out in compensation.
Ocean claims that Oval presented itself as having specialist insurance knowledge and expertise on financial matters.
But Oval argued that its knowledge did not extend fully to PPI or the FSA’s approach to PPI, adding that Ocean received PPI advice from its lawyers.
Over a period of two years between 2008 and 2010, Ocean’s PI cover was provided by CNA and Hiscox.
Under both policies CNA provided an initial cover of £1.7m, and Hiscox, an extra £3.3m.
Regulator focus on PPI
Oval became Ocean’s broker in 2007.
It was during this period that the FSA shifted its focus to the sale of PPI.
Typically added to loans, PPI covers repayments if a borrower is made redundant, or falls ill.
It was widely mis-sold by lenders because many customers were unaware they had bought it.
By 2009 the FOS recorded a six-fold increase in PPI complaints.
From 2009 the regulator introduced changes to the sales process, told firms to consider wider redress programmes for all PPI customers and launched a thematic review to assess compliance by firms.
Ocean claimed in 2009 Oval knew there was a “real risk” it would have to conduct a costly review of its PPI book which could lead to compensation for a wider pool of customers, because its sales calls were based on scripts.
Ocean also cited several discussions with Oval between 2008 and 2010 on the regulator’s focus on PPI.
But Ocean alleges that in 2009, it was only advised to tell Hiscox and CNA about claims from customers that complained.
In fact, Oval should have handed over details containing the likelihood of paying compensation to all of its customers, it is claimed.
Ocean claims it gave the all the full details the following year – but by then the damage had been done.
It meant that when Ocean had to fork out for wider compensation payments and the costs of a business review, the only amount covered by CNA was for the reported complainants.
The following year, in 2010, Ocean was successful in recovering £1.7m from CNA’s primary indemnity cover, but not from the ‘top up’ Hiscox policy.
Hiscox should have been told earlier in 2009 about the likely review and wider payments, it is claimed.
Oval argued that Ocean should have challenged Hiscox for “wrongly” declining payment.
Oval added the bulk of conversations in 2009 focused more on redress to customers who had complained, rather than any risk from the FSA ordering companies to conduct a review.
The broker denied it knew that Ocean’s PPI sales relied on scripts or that a breach in one sale meant a potential breach in all that could lead to wider compensation.
All the parties involved in the case have declined to comment.