The Court of Appeal has affirmed the High Court order setting aside a Financial Services and Pensions Ombudsman (FSPO) decision that directed Utmost PanEurope DAC to admit an income protection claim and pay benefits to an anonymised complainant, identified in the judgment as W.
In a ruling on costs and consequential orders, the court also directed the FSPO to pay all of Utmost’s costs of the appeal. It found no need to remit the complaint to the ombudsman for further consideration.
The ruling follows the Court of Appeal’s principal judgment, delivered on 30 March 2022, in a statutory appeal limited to points of law. That judgment upheld the High Court’s decision to set aside the FSPO’s decision and direction of 15 July 2019. The costs ruling explains that Utmost had sought, and maintained, that central relief.
The FSPO had argued that it succeeded on two of three certified legal questions and that Utmost should recover only half its appeal costs. The Court of Appeal accepted that the FSPO succeeded on the abstract question of whether it could direct a remedy without first finding a breach of contract. But it stressed that any remedy must have a logical relationship to the conduct found at fault and must be carefully considered, including for proportionality and impact on the provider.
In the principal judgment, the court concluded that the direction to pay benefits was disproportionate and unconnected to the fault identified by the FSPO. The ombudsman had said Utmost overemphasised an excluded medical condition and failed to give sufficient consideration to rheumatoid arthritis, which could be covered if the complainant met the policy conditions. The Court of Appeal considered the interpretation of correspondence underlying that conclusion unsustainable.
The court said the FSPO had addressed only one of four elements of the complaint. The other elements concerned the initial rejection of the claim, rejection of an appeal within Utmost, and whether the insurance scheme was suitable for W’s needs. It concluded that returning those matters to the FSPO would serve no useful purpose. It also said any suitability complaint could only arise against Friends First, which originally provided and operated the scheme; the court expressed no view on whether such a complaint had a basis or could still be pursued.
The final orders affirmed the High Court order setting aside the FSPO decision and its direction in full, affirmed the High Court costs award to Utmost, and ordered the FSPO to pay Utmost’s appeal costs. Any dispute over the amount is to be determined by a legal costs adjudicator.