The Financial Services Authority’s recent announcement that the maximum binding award of the Financial Ombudsman Service is to be raised to £150,000 has recently prompted professional indemnity insurance experts to predict an increase in judicial reviews.
Lawyers at Browne Jacobson recently stated that in addition to a projected increase to professional liability insurance premiums, the FSA’s plan to increase the FOS limit up from its current £100,000 level on 1 January 2012 will lead to more attempts to challenge FOS decisions. Financial services and dispute resolution specialist, Jonathan Newbold, remarked that this is because more money will be at stake when the FOS makes determinations on complaints.
Mr Newbold remarked that courts may need to find new ways through the wide statutory authority of the FOS in order to curtail what seems to be an ever increasing power base. The Ombudsman’s authority stems from the 2000 Financial Financial Services & Markets Act, the business insurance legal expert added.
There are a number of firms who face regular frustration by both their status as being subject to FOS jurisdiction and the quality of adjudicators’ decision making, added Mr Newbold. If an ombudsman in his or her opinion considers that a complaint that would normally not succeed in a court of law that an alternative outcome is both fair and reasonable, he or she can make such a determination, the legal expert said.
Mr Newbold commented that many that stand in the firing line could stand to have their feathers ruffled by such decisions, especially in light of the possibility of a new £150,000 limit on binding awards can mean additional costs for those on the receiving end of such a decision. Luckily the new increase will not be retrospective – which means it will only be applicable to complaints arising on or after the new January date.