Red letter ruling paves way for time-bar cases

A ruling in a small claims court has effectively given the green light for time-barred endowment complainants to take their cases to court after ruling that a red letter provided insufficient warning to a policyholder.

In March, a judge at Reigate county court ruled that endowment policyholder Vincent Cunningham, who was time-barred under FOS rules, was not statute-barred from making a complaint under the Limitation Act. This gives customers three years to make a complaint from when they are given reasonable notice of a loss caused by misselling.

Court notes released last week, the judge said Friends Provident, which admitted misselling the policy, breached its duty of care by not providing sufficient warning in an endowment red letter. The judge said the letter, sent on August 8, 2000, did not state the possibility the claimant could have been missold a policy and was not sufficient to set a three-year time limit in motion.

The judge said Cunningham, who was complaining about the amount of redress he got for a missold endowment policy, was not barred under general law from making his claim even though it had been more than three years since he received a red letter.

The FSA says it is unlikely the issue would happen again. with revised letters that have been sent out since 2004 but the case has prompted concerns that time-barred complainants will take legal action.

Adam Samuel Training and Consulting principal Adam Samuel says: “This does not create a legal precedent but does show that many cases that were time-barred by these early letters should never have been time-barred in the first place.”