Alternative to litigation
Kliger Partners’ litigation department offers many services to its clients that are designed to reduce the time and expense of litigation or that may avoid litigation altogether.
One option is to pursue a claim before the Financial Ombudsman Service which has jurisdiction to hear claims against financial services providers, including banks, and insurance companies.
Decisions made by the Ombudsman are usually by way of a panel of experts and there is an informal mediation process that will precede a dispute being decided.
The Financial Ombudsman Service (FOS)
The Financial Ombudsman Service was created on 1 July 2008 when the Insurance Ombudsman Service, the Financial Industry Complaints Service and the Banking and Financial Ombudsman Service were consolidated. The FOS independently and impartially resolves disputes between consumers — including some small businesses — and participating financial services providers.
Have your cake and eat it too
When a claim is referred to the Ombudsman, its decision is binding on the insurer or financial institution but not on the party making the claim. The party making the claim has the right to reject a decision made by the Ombudsman and resort to litigation.
The benefits to making a claim with the Ombudsman instead of resorting to litigation include:-
- The FOS is free to consumers but it charges fees to the insurers, banks and finance companies, which in turn places pressure on them to settle claims.
- No hearings, and therefore no barristers’ fees.
- As of 1 January 2010, the FOS will have jurisdiction to hear claims of up to $500,000, however, it can only make an award of up to $280,000 in favour of the party making the claim.
- A history of the resolution of disputes shows that claims with merit have almost always been resolved by the FOS, with the majority of claims decided in favour of the consumer.
- Enabling the issues, defences and documents of the financial company or insurer to be aired and obtained prior to litigation.
There are some disadvantages to bringing a claim before the FOS, they include:
- It can take considerable time for the FOS to consider a dispute and provide a decision.
- Cost of legal representation. Kliger Partners has however had success recovering some of its clients’ costs via negotiation as part of an overall settlement of a dispute before the FOS.
- Limit of award to $280,000.
Who can use the FOS?
As the FOS is intended to provide an appeal service to consumers it is geared towards individuals and small businesses.
Its new terms of reference, which take effect on 1 January 2010, restrict the availability of this avenue to individuals or small businesses which have 20 employees or less, or in the case of a manufacturer, 100 employees or less.
In a recent matter before the FOS involving the alleged cancellation of an income protection insurance policy, Kliger Partners was able to obtain a settlement in excess of the FOS’s jurisdiction because through the informal discovery process, documents were obtained to show that the insurer was in fact notified that the client had moved but that the insurer had failed to update its records. The insurer could no longer rely upon the allegation that the client had failed to notify it of his new address.
The insurer also contributed $5,000 towards our client’s costs.
Kliger Partners is also currently representing clients before the Ombudsman:
- against financial advisers and stockbrokers that failed to properly advise their clients in relation to complex financial products; and
- in connection with misrepresentations made to clients that have resulted in the loss of money.
An alternative to litigation
An application to the FOS is a means for some people and businesses to resolve a dispute with financial service providers at less cost than litigation, and with the added advantage that the FOS’s decision is not binding on the party bringing the claim.
No evidence needs to be given in the witness box, and therefore there should be no fear of being cross-examined at length by a barrister.
If you have a claim that you think is worth pursuing before the Ombudsman, and for a no-obligation discussion, please contact David Weinberger, Principal Lawyer, on (03) 8600 8863 or email@example.com.
Note: This update is a guide only and is not intended to constitute legal advice.