Business Interruption Cases and the Financial Ombudsman Service

The UK Supreme Court recently delivered its judgment on the Financial Conduct Authority Business Interruption test case. The decision of this case is highly important to small businesses, who may now be able to have their business interruption claims heard.

We all know that there are several ways to resolve disputes - written correspondence; negotiation; using a solicitor or indeed tacking the case yourself through the Courts.  However, there is also another route, which may be lesser-known but could assist an aggrieved party and which, potentially, could also be quicker and more specialist.  

The Financial Ombudsman Service (FOS)

Business interruption policies fall under services provided by regulated financial bodies and as such the claims typically fall under the Financial Ombudsman Service (FOS). The FOS provides an alternative forum to resolve disputes between consumers and financial services businesses, including insurance companies. The FOS is aimed at being a more informal, more cost-effective and time-efficient service. The FOS is free to utilise and there are no adverse cost risks, such as those that may arise in general litigation.

From 1 April 2019 the FOS’ award limit was raised to £350,000 for complaints which took place after that date. From 1 April 2020, the FOS’ award limit was raised further to £355,000. Business interruption cases relating to Covid-19 benefit from these two limits, depending on the date of events giving rise to the claim.

Small Businesses

On 1 April 2019 the capabilities of the FOS were extended, to allow for most small businesses to be able to complain to the FOS. To fall under the definition of a ‘small business’ it must be an enterprise which:

1. is not a micro-enterprise;
2. has an annual turnover of less than £6.5 million (or its equivalent in any other currency); and
   1. employs fewer than 50 persons; or
   2. has a balance sheet total of less than £5 million (or its equivalent in any other currency)

As a result of these changes, around 99% of small businesses are now eligible to use the services provided by the FOS.

Additionally, a business classified as a 'micro-enterprise' (meaning fewer than 10 employees and a turnover less than £2 million) are also entitled to pursue a claim under the FOS.

The FOS Process

The first step when pursuing your complaint to the FOS, is not to strictly determine that you are making a claim but just to provide notice of your dissatisfaction to that financial services firm you wish to claim against. Once this has been submitted, the business will have eight weeks to respond from the date of receipt of the complaint. Upon receipt of the business’ response, or expiration of the eight-week time period, of course assuming your complaint has not been resolved amicably, your complaint can be referred to the FOS.

It is important to note that a complaint must be made within six months of a response from the business. If you do not make this deadline, your complaint may become time-barred and the FOS may not consider your case. There are limited exceptions to this rule, namely:

• The delay is due to exceptional circumstance, such as serious health issues.
• The respondent business did not submit a valid response.
• The respondent business agrees to the FOS becoming involved after the time limit has expired.

Once a complaint has been received, it will be allocated to a case handler for further investigation. This will involve communications with both parties to the claim in order to reach a decision, or in some cases multiple decisions.

Once a final decision has been obtained, if you are still unsatisfied as to the result, there is, in effect, an 'appeals' process in which you can ask for an Ombudsman to give a final decision.  The process is very similar to that of the first stage of decision making.

The process of using the FOS is streamlined and easy to navigate through, resulting in an appealing alternative for business interruption disputes, to either a straightforward complaint or to 'the legal route'. 

How can Jamieson Alexander Legal Help?

Jamieson Alexander Legal's Banking and Finance Litigation Team have extensive experience and knowledge of a wide range of areas relating to money disputes. This includes substantial experience acting for SMEs in commercial disputes, professional negligence claims and high-value mis-sold financial product disputes.

If you feel you may have a valid Business Interruption Policy covering Covid-19, and feel unhappy with a decision from an insurer in regards to your claim (either before or after using the FOS), please contact our Banking and Finance Litigation Team. We understand the distress and financial pressures that can be caused in money-related disputes and are therefore happy to offer flexible funding option and, where appropriate, assist you on a no-win no-fee basis.