A new High Court judgment against a retired IFA has opened the door for millions of policyholders to pursue advisers into retirement over claims of professional negligence.
The court's decision in the case of Glaister v Greenwood relaxes the time constraints for when professional negligence claims can be brought, leaving IFAs needing PI cover in retirement.
The ruling will allow policyholders to bring claims if they can show they did not know they had suffered loss even though they may have seen press reports and regulatory circulars over the pension review and the endowment crisis.
Charles Glaister took IFA Richard Greenwood to court, claiming he had wrongly advised him to transfer his occupational pension to a personal plan.
The case comes six days after a similar case, Cave v Robinson, Jarvis & Rolfe relaxed the long-stop 15-year limit for claims.
Industry lawyers believe it will be important for IFAs to keep files and maintain run-off PI insurance until death.
PI insurer Collegiate Group managing director Tony Howe says: “There is an unfortunate trend in the courts to deny time limits in favour of consumers.
It means IFAs will never be clear. The only safe thing to do is die.”
An FSA spokeswoman
says: “This decision is a matter for the ombudsman and
the courts. Each case will
be dealt with on its merits.”
The PIA Ombudsman has changed its policy as a result of the earlier Cave case and has published new guidelines which say: “A client advised to take out an endowment policy in 1989 who raises concerns in 1994 but did not complain until 2000 may not be time-barred.”
Syndaxi Financial Planning director Robert Reid says: “Run-off cover will get more expensive and there will be
significant excesses. Companies retaining liabilities
when IFAs retire will have their value eroded.”