'Long tail of claims' without 15-year limit - Professional Indemnity Insurance for IFAs

31/10/2008

Independent financial advisers (IFAs) could face a "long-tail" of Professional Indemnity insurance claims if preventative measures are not taken, it has been reported.

Law firm Browne Jacobson has backed calls from numerous IFAs for a 15-year time limit to be implemented for any complaints made to the Financial Ombudsman Service (FOS) in relation to the giving of poor financial advice, Mondaq reports.

Jonathan Newbold, associate at Browne Jacobson, said: "It is almost impossible to manage historical liabilities because it is never going to be entirely safe to assume that no claims will arise from advice provided more than a decade ago."

He added that if a 15 year stop period for complaints is not introduced, concerns that the risk of retrospective judgment being made on based financial advice given years ago "will prove to be the real unfairness".

In addition, it was stated that if this does not happen, the law firm reports that IFAs could face a vast number of complaints, meaning they will need a sustainable amount of PI cover.

Mr Newbold's comments come after it was suggested that the Financial Services Authority may not adopt such a limitation following pressure from consumers groups to have an open ended period of time where complaints can be made to the FOS.

PYV's Director of Claims, Robert Bass, commented: "The 15 year long-stop under S14 of the Limitation Act 1980 operates in law to provide protection to advisers and other professionals. Whilst records may (and should be) complete, the passage of time distorts recollections on both sides as to what may, or may not, have been said and it is only right and proper that a business should be able to rely upon the law of the land to protect them. The FOS should recognise this principle in an endeavour to be even-handed in it's dealings with investors and regulated firms."

Earlier this year, it was revealed that the FOS dismissed an attempted claim against an IFA after it was revealed that a client had attempted legal action against the adviser after claiming they had not been informed of any alternative ways to repay a mortgage other than the endowment policy they had taken out.

However, the FOS pointed out that the IFA had recorded that the couple had been given a document highlighting the dangers involved with their policy and so did not uphold the complaint.

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PYV are one of the UK's leading providers of professional indemnity insurance. This news article has been produced by Adfero in collaboration with PYV and its unauthorised use is not permitted.

(c) 2008 Adfero Ltd.

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