Pros & Cons – FOS vs Legal Action

For many of our members the FOS remains an option, however the route has become complicated by the FCA court action, so we want to provide you with a list of pros and cons to pursuing your complaint through the Ombudsman.

Even if you decide to pursue your complaint through the Ombudsman, you can avail of Mishcon’s legal advice to date but only after agreeing to their retainer letter.

Of course there are particular strengths and weaknesses of every claim and those should be weighed on an individual basis.

Financial Ombudsman Service

Pros of the FOS

  • Free to use. There’s no charge to use the FOS complaints resolution service
  • The FOS uses the law of the land, industry good practice and regulators rules and guidance to inform its decision
  • No need for legal advice, you can put your complaint in your own words
  • If the FOS finds in your favour, the company must comply with their judgement

Cons of the FOS

  • Can take a long time. This is complicated by the fact the FOS will need to wait for the FCA court action to be completed because the FOS takes their guidance from the FCA
  • Your awards are limited to what the BI policy covers and no damages that might be available under the Enterprise Act
  • If you take legal advice, you will have to pay for it, but you won’t be represented before the FOS
  • The FOS judges cases on a fairness basis, not necessarily what the law states, though they will take guidance from the FCA and related cases
  • The FOS acts independently and you will have no control over their investigation
  • There may not be an investigation at all, the FOS has the power to just look at the facts of the case and settle it from those.
  • Decisions may differ from case to case, so not every complaint will result in the same compensation as another.

Legal Action

Pros of Legal Action

  • Can approach Hiscox directly on your behalf
  • Will be able to claim for some legal costs and additional damages under the Enterprise Act
  • Can act much quicker to get to arbitration
  • No expense up front and if a decision is given against you, no fees required
  • Strength of major City firm with full litigation funding
  • Relies on legal precedent and contractual wording of your policy
  • We will be able to hopefully get rulings on most fact patterns of claims, whilst of course not being able to guarantee a precedent for your particular claim.

Cons of Legal Action

  • Will incur a cost, though it is deducted from the final award
  • You may be liable for legal funding costs if you leave the action early
  • Very hard to challenge an arbitration decision

FCA Statement – 1 May

The Hiscox Action Group welcome this intervention by the Financial Conduct Authority, although we are seeking clarity as to what precisely their legal action will involve.

In the meantime we ask that Hiscox BI customers and our members please continue to engage with us and Mishcon as regards your claims.

FCA statement – insuring SMEs: business interruption

Today, the FCA is announcing that it intends to obtain a court declaration to resolve contractual uncertainty in business interruption (BI) insurance cover.

Policy Schedule & Wording

If you’re unsure what your Hiscox Policy Schedule is, the file is usually named
DC546 – Policy Schedule and Statement of Fact
and looks like this:

Your values may be different, but you will be claiming under the Public Authority and/or Denial of Access cover. These are the Amounts Insured you need to look at, not the figure next to loss of income.  HOWEVER, if your total amount insured for loss of income is LESS than the Special Limit, this will be the only amount you can claim for.


Your business policy wording should look similar to this and the file name is usually:
DC565 – Hiscox Business Wording
Depending on your cover, policy type, and/or subsections the wording reference at the bottom of the page can vary. [e.g. WD-RET-UK-PYI(2) 16105 12/17]

Complaints Template for Hiscox

Dear Claims & Complaints Team

Regarding your email below, our understanding of our policy is that we are indeed covered.

Please see below the relevant section of our business interruption wording.  

What is covered:

Public authority 13.        your inability to use the insured premises due to restrictions imposed by a public authority during the period of insurance following:

A. a murder or suicide;

B. an occurrence of any human infectious or human contagious disease, an outbreak of which must be notified to the local authority;

C. injury or illness of any person traceable to food or drink consumed on the insured premises;

D. defects in the drains or other sanitary arrangements;

E. vermin or pests at the insured premises;

This means that the business interruption may respond if you are unable to access your premise insured due to COVID-19. These instances are treated on a claim by claim basis.”

As we are now unable to use our premise insured due to the Government lock down, we believe this condition is met.



With regard to your email below:
“These sections only cover BI losses where those losses result solely and directly from an interruption to your business caused by a denial of access or an inability to use the insured premises due to restrictions by the Government or a public authority.”
Thank you for this clarification, as our losses are indeed solely and directly from an interruption to our business caused by a denial of access or inability to use the insured premises due to restrictions by the Government or a public authority. There is no other reason, and happily, our accounts up until closure reflect this.

You also state:
“The Non-Damage Denial of access cover applies where there is an incident within a one mile radius and then the Government or a public authority impose measures which prevent or hinder access to the insured premises. Examples would be where the police cordon off the area surrounding a riot or a hotel is evacuated by the police following a nearby gas leak or fire. The multitude of wide ranging measures the Government is taking to contain the Coronavirus pandemic are very different in nature”

Our policy states:
“Non-damage denial

of access

3. an incident occurring during the period of insurance within a one mile radius of the

insured premises which results in a denial of access or hindrance in access to the

insured premises, imposed by any civil or statutory authority or by order of the

government or any public authority, for more than 24 consecutive hours;”

You do not define ‘incident’ – the common dictionary definition being “something that happens, especially something unusual or unpleasant”. The outbreak of COVID-19 can be taken as something happening that is unusual and unpleasant.

As the outbreak is across the whole of the UK, it would be reasonable to assume that it ALSO falls within a one mile radius of the premises.

Restrictions are indeed in place – as the lock down has been ordered by the Government, to be enforced by the police (another public authority).

The examples you give of a riot or a hotel evacuation may be things that you would cover – they don’t preclude cover in this instance – they are merely, as you state, examples.

You go on to state:
“The Public Authority cover is narrower and only triggered following certain specific occurrences, all of which must happen either in the vicinity of or at the insured premises: a murder, an occurrence of a contagious disease that must be notified to the local authority, food poisoning, problems with the drains or vermin. The restrictions the Government has imposed are part of its national response to reduce the impact of the Coronavirus pandemic; they were not issued following or in response to “an occurrence” at your – or any – specific location, placing them outside the scope of the policy. “

Our policy states:
“11. your inability to use the insured premises due to restrictions imposed by a public

authority during the period of insurance following:

a. a murder or suicide;

b. an occurrence of any human infectious or human contagious disease, an outbreak

of which must be notified to the local authority;

c. injury or illness of any person traceable to food or drink consumed on the insured

premises;

d. defects in the drains or other sanitary arrangements;

e. vermin or pests at the insured premises;”

Under the current restrictions, it is clear that we are not allowed to use our premise insured, on order of the Government.
The Government has ordered the closure of non-essential businesses on the basis of the outbreak of COVID-19 – which IS a notifiable disease.
Our policy does NOT state “all of which must happen either in the vicinity of or at the insured premises”. We feel that since this is specified in other sub-clauses, this infers the clause b (an occurrence of any human infectious or human contagious disease, an outbreak) cannot be tied to the premises in the same way.

Finally, our BI loss is due solely and directly to the denial/hindrance in access to or inability to use your premises. We are not looking to claim for any general economic downturn.

We look forward to receiving your confirmation that our claim may go ahead.