The Financial Services Ombudsman is asking IFAs to forego a legitimate defence to claims brought against them which could see them invalidating their professional indemnity cover.
A recent court decision tightened the time limit for consumers bringing cases against IFAs but the ombudsman has requested that advisers let cases continue even though they could get them struck out as time-barred.
IFAs have questioned whether it is appropriate for the ombudsman to request they ignore the time limit defence to claims, arguing that firms are beset with increasing liabilities because of a growing compensation culture.
Explaining the law change in this month's newsletter, the ombudsman says: “We think it would be most unfortunate if firms were to ask us to apply the narrow interpretation (of the time limit) to complaints we are currently investigating.”
But IFAs say it is not for the ombudsman to ask them to forego a business benefit where they could avoid a claim on a technicality as this could invalidate PI cover that requires firms to keep losses to a minimum.
Ombudsman spokeswoman Iris Baker says: “We believe that we should continue dealing with these complaints if at all possible, even where – strictly speaking — firms could prevent us from doing so by pleading the revised limitation defence. Any firm wishing to take advantage of this reinterpretation must write and tell us.”
Laird Financial Planning senior partner Steve Laird says: “I have had no complaints, but I would be concerned as we have a duty of care to our PI insurers. If they want the law changed they should ask the Government to change it rather than asking IFAs to do it for them.”