Garbhan Shanks and Harriet Stokes are featured in Insurance Day - FOS has no jurisdiction to determine D&O complaint

One of the most interesting judgments of the year was in R (on the application of Bluefin Insurance Services) v Financial Ombudsman Service, in which the High Court ruled against the Financial Ombudsman Service (FOS) for deciding it had jurisdiction to rule on a commercial claim brought against Bluefin.

This article first appeared in Insurance Day

In R (on the application of Bluefin Insurance Services Ltd) v Financial Ombudsman Service Ltd the High Court ruled against the Financial Ombudsman Service ("FOS") for deciding it had jurisdiction to rule on a commercial claim brought against Bluefin. 

The facts

The Claimant, Bluefin, acted as broker for Betbroker Ltd ("Betbroker") in arranging its Directors' and Officers' ("D&O") cover with AIG Europe Ltd in 2007. Under the D&O policy, Betbroker was the policyholder and Mr Lochner, its founder and CEO, was an "insured person". Mr Lochner claimed that he had notified the broker of a potential legal claim brought against him by Aberdeen Asset Management alleging that they had invested in Betbroker following false representations made by Mr Lochner. Litigation was subsequently commenced in September 2011 and the claim was eventually settled. Mr Lochner sought to recover under the D&O policy but insurers refused to pay out on the basis that they had not been notified of the loss until after the policy expired, in September 2008. 

The FOS decision

Mr Lochner complained to the FOS that Bluefin had failed to notify underwriters promptly. The FOS accepted jurisdiction for the claim, determining that Mr Lochner was a "consumer" and therefore an eligible complainant. The definition of "consumer", found in the Glossary to the FCA Handbook, is "any natural person acting for purposes outside his trade, business, or profession." In reaching its decision on jurisdiction, the FOS said:

"The question of our jurisdiction is not whether Mr Lochner was acting in the course of his employment when he carried out the acts for which he has been sued, but rather whether he is acting outside his employment when bringing this complaint to this service." 

Bluefin mounted a judicial review challenge to the FOS's decision that it had jurisdiction to entertain Mr Lochner's complaint, asserting that it had erred in law. The FOS did not reach a decision on the substantive merits of Mr Lochner's claim. 

The judgment of the High Court

Issue 1 – is a decision on "consumer" an issue of "precedent fact"

Bluefin claimed that it was for the court, not the FOS, to determine the jurisdictional issue of whether Mr Lochner was a "consumer". The court agreed, finding that the FOS decision was one of precedent fact and, upon its being challenged in judicial review proceedings, it is a decision which the court has to take, rather than being limited to review the decision on conventional judicial review grounds. 

Issue 2 – did the FOS misdirect itself in law?

(a) When should the assessment of eligibility be made?

The FOS had assessed whether Mr Lochner was a consumer at the time that his complaint was made. Bluefin argued that this assessment should have been made, at the latest, at the time of the act or omission which he complains of (i.e. when the broker failed to notify insurers of the potential claim). The court agreed with the FOS that Mr Lochner would be an eligible complainant if, at the time he brought the complaint, he was a consumer, as defined. 

(b) Did the FOS incorrectly conclude that Mr Lochner was a "consumer"?

Bluefin argued that the FOS had not properly dealt with the issue of whether Mr Lochner was acting outside the purposes of his own trade, business or profession. The court agreed, finding that the purpose of Mr Lochner making his complaint to the FOS was to obtain redress for the loss he sustained as a result of being unprotected under the D&O policy in respect of a claim made against him for wrongful acts in the course of his trade, business or profession. As such, the court said:

"…the subject matter of his complaint was wholly concerned with the potential loss arising from lack of insurance cover in respect of liability which he had incurred in the course of his trade, business or profession."


The judgment appears sensible and of course will be welcomed by insurers. Whilst D&O cover is taken out to protect directors and employees from personal liabilities, it is only those liabilities which arise in the context of their employment which are covered.

Interestingly, Mr Justice Wilkie made clear in his judgment that a complaint by Mr Lochner's wife, who was also an "insured person" under the D&O policy, in her capacity as his spouse, could have been made as a consumer, as it would have been made for a purpose outside of her trade, business or profession. 

By analogy, it would seem that business travel insurance might also fall on the wrong side of the line so far as the FOS's jurisdiction is concerned, preventing employees who suffer loss from complaining to the FOS if, through some failure to properly manage the policy, they could not recover from insurers. By contract, Mr Justice Wilkie made clear that, in his opinion, the same conclusion should not be reached in relation to other group protection policies such as private health insurance, where a complaint by a beneficiary could be made as a consumer.

The decision is likely to leave question marks as to the effect of boilerplate type clauses, which commonly exist in commercial insurance policies, referring policyholders to the FOS should they have a complaint, and whether in this scenario an argument could be successfully advanced that the parties have consented to the FOS having jurisdiction.

For further information please contact Garbhan Shanks - Partner, by telephone on 02076 594636 or by email at or Harriet Stokes - Solicitor, by telephone on 02076 594626 or by email at