Payment protection insurance (PPI) is important to have in place particularly in times of financial instability. However research indicates that there are here many people who have taken out payment protection insurance for their loans but now find that they are unable to claim due to onerous qualifying clauses in their PPI policies. Put simply, they were Mis-Sold Payment Protection Insurance which is in breach of FSA regulations.
Here a few case studies that were presided over by the Financial Ombudsman, which will help you to assess whether you have been Mis-Sold PPI. For more information, call Legal Advice Helpline free on 0800 612 3042.
April 2003 'Actively Working at Her Business'
Mrs. M was a self-employed dietitian for a dieting organisation. After the birth of her child in February 1998, she did not return to work for some months. In June 1998, while she was still unemployed, a lender telephoned to offer a loan to her and her husband, who was in full-time employment. She was also offered insurance to cover the repayments and she agreed to take out both the loan and the insurance. The paperwork named only Mrs. M as the borrower but she did not consider this important.
Mrs. M returned to work in September 1998, but was offered less work than previously and her earnings were only £12 per week. Her husband fell ill in November and was diagnosed as having a brain tumour.
When the couple put in a claim for disability benefits, they were told the policy did not cover him. Mrs. M contended that when the policy was sold she had provided full details of her husband's earnings and her own status, and had discussed the recent birth of their child.
Complaint Upheld
It was up to the insurer to prove that the policy had been properly sold and that the sale complied with the provisions of the ABI Code. The insurer was clearly aware that Mrs. M was both self-employed and on 'maternity leave'. Since she was not 'actively working at her business' she was not eligible for the policy. However, we did not consider that the insurer's refunding the premium constituted an appropriate resolution of the dispute.
We accepted the insurer's contention that the policy could have been transferred into the husband's name at Mrs. M's request. However, we did not agree that her failure to make such a request meant she had deliberately chosen not to take out cover for her husband. We were satisfied that the policy had not been properly explained at the time of the sale.
The appropriate outcome was for the insurer to amend its records to include the name of the husband on the policy and to meet his disability claim.
April 2006 'In UK - Whether Claim Valid'
Mr. D worked as an oil industry welder in the UK. In March 1999 he bought a car on hire purchase and took out insurance to cover the loan repayments. In June 1999 his employment was terminated. He obtained work as a welder through an agency in Manchester and was employed in Belgium from August 1999 until January 2000, when that job was terminated. He then returned to the UK and signed on as unemployed.
The insurer rejected his claim for unemployment benefit on the ground that the policy contained an exclusion for anyone working outside the UK.
Complaint Upheld
Mr. D was a UK citizen who had returned to the UK and was registered for employment here. This was not a case where there was a need for the insurer to make enquiries of the relevant authorities abroad to see whether he met foreign criteria for state benefits. We considered that Mr. D had complied with the spirit of the policy terms, if not with the strict wording. The insurer agreed to our recommendation that it should meet the claim and reimburse any penalties charged by the lender.
April 2001 'Monthly Benefit'
Mr and Mrs. H took out insurance to protect their joint mortgage repayments, choosing a monthly benefit of £500. In October 1998, Mrs. H became unemployed and submitted a claim. The insurer made monthly payments of £250. Mrs. H and her husband argued that she was entitled to £500 per month. In their opinion, the policy covered each of them for that amount. They said this was what they were told when they bought the policy and it had been confirmed in the insurer's letter accepting the claim.
The insurer did not accept this argument, stating that the policy explained clearly how benefit would be calculated. However, it offered £50 compensation 'for the errors and incorrect advice'.
Complaint Upheld
Neither the application form nor the insurance certificate explained the amount of monthly benefit that would be paid in the case of joint applicants. Both documents showed the amount of the monthly benefit required as £500 and contained no more than a general reference to the booklet which detailed the conditions. There was no specific reference to the limitation of cover in the case of joint borrowers.
The layout of the conditions booklet was confusing and unlikely to help anyone wishing to ascertain the position for joint borrowers. On Page 4, 'monthly benefit' was defined as 'the amount you have agreed with us as specified in your certificate of insurance' but there was no reference to the limitation that applied to joint borrowers. The sections of the booklet, 'What we will pay', 'What we will not pay' and 'How to claim' also failed to reveal the relevant limitation.
The limitation was, in fact, set out under the heading 'Eligibility':
'If the mortgage has been taken out by joint borrowers who are all eligible for cover … each borrower's cover is limited to an equal share of the monthly benefit, eg; if the monthly benefit is £600 and there are three borrowers eligible for cover, each would be covered for £200'.
The insurer appeared to have accepted at an early stage that there was some substance in the complaint. It accepted our recommendation that it should make an additional payment to Mrs. H on the basis that her true entitlement was to benefit payments of £500, plus interest. It also increased its compensation offer to £200.
The above case studies show why it is important to read and understand all terms and conditions when signing a Payment Protection Insurance plan. Understanding your plan fully will help you know when you will be covered and when you will not.
More information on making a complaint about payment protection insurance
For more information on making a complaint about Payment Protection Insurance plans or claims call Legal Advice Helpline free on 0800 612 3042. We can help you find the right advice. To see whether there is a likelihood that your claim may be valid please complete our questionnaire by clicking here.
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