ARAG Legal Expenses Insurance Company Limited · DRN-6123707

The complaint Mr S complains about unreasonable delays in the payment of legal expenses by ARAG Legal Expenses Insurance Company Limited (ARAG) as part of a claim. What happened Mr S holds a legal expenses insurance policy with ARAG and has an ongoing claim in respect of an employment dispute. I won’t go into detail about that dispute as it isn’t relevant to the complaint or the decision I need to make. ARAG has accepted cover for the claim and agreed to pay the reasonable costs incurred by the solicitor acting on Mr S’ behalf in line with the policy terms and conditions. Mr S has separate legal expenses insurance cover and it’s been agreed that ARAG would pay the solicitor and then be reimbursed by the other insurer. Mr S made a complaint to ARAG as there had been a delay in the solicitor being paid. As a result the solicitors had, in Mr S’ words, effectively “downed tools,” until the payment was received. He was concerned about the impact on his claim. ARAG’s offered £200 compensation to recognise that it had unnecessarily delayed the payment to Mr S’ solicitors. Mr S believes there has been a very significant impact on his claim, and on him and so the compensation payable by ARAG should be between £50,000 and £100,000. Our investigator considered the compensation offer from ARAG to be fair, as there was no evidence of a serious detriment to Mr S’ claim, but recognised the delay in payment would have caused additional frustration and distress to Mr S. Mr S didn’t accept this and asked for an ombudsman’s decision. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I’m satisfied that ARAG’s offer of £200 compensation to recognise there had been unnecessary delays to the solicitor’s payments is fair. My reasons for this are broadly in line with our investigator, but I’ll explain why I’m not minded to ask ARAG to pay more, and why Mr S’ position that compensation of up to £100,000 is appropriate isn’t one I agree with. My starting position is that an award of the amount suggested by Mr S is that such an award would be reserved for a situation where there is an extreme impact of a financial business’ actions. The most our service can award a complainant is £445,000 (for matters referred after 1 April 2025, as Mr S’ complaint was), but a compensation award of between £1,500 and £5,000 would generally be appropriate where mistakes caused sustained distress, potentially including affecting someone’s health, or severe disruption to daily life typically lasting more than a year. Something that has an extremely serious short-term impact could also warrant

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such a level of compensation, but I’d usually expect to see some ongoing or lasting effects. Mr S suggests the impact on him of ARAG’s delay in settling his solicitor’s costs should be recognised by an award of at least 10 times the top level of this range. I acknowledge Mr S’ position is that there is a financial loss as a result of this failure to make timely payments to the solicitors. He suggests there was effectively a loss of momentum to his claim, as a result of the solicitors not taking action to progress proceedings in the absence of payment. He also believes there was a detrimental effect on his negotiating position as a result. Mr S has also suggested that the solicitor has already billed, or will bill, additional hours, for their time spent chasing the payment from ARAG (which would potentially be deducted from the policy indemnity limit, rather than the indemnity being used to pay for the legal expenses incurred in pursuing the claim). As evidenced by other complaints referred to our service, Mr S wants to ensure that the policy indemnity goes towards the costs of pursuing his legal action, rather than costs relating to, or arising from, the administration of the claim. However, Mr S has been unable to quantify these suggested losses, either by way of demonstrating that the claim itself has suffered a quantifiable detriment (either by way of the likelihood of success or the amount he’d be likely to receive in settlement) or the additional costs charged by the solicitors. As no evidence has been provided to show that Mr S has suffered either a direct or indirect financial loss as a result of the delays, I’m unable to make any award for that. That means that I’m considering the impact on Mr S of the delays, and what amount of compensation should be paid to recognise that. ARAG acknowledges that its handling of the claim fell below the required standard, and its obligation to handle claims promptly and effectively. It’s accepted that the solicitor was asking for payment from January 2025 until ARAG acknowledged its responsibility to meet the costs in May 2025, even though it had earlier agreed it would pay the solicitor directly and then seek reimbursement from the other insurer. Responsibility for this can only fall to ARAG, and it’s clear the communication about its obligations to pay the solicitor were contradictory. It also had ample opportunity to correct the mistake and process the payments sooner than it did. Both Mr S and the solicitors were asking for the payments to be made, but it continued to suggest it was only liable for its proportion of the costs. That was, it’s accepted, an error. So the impact on Mr S did last several months, but in the overall scope of the claim, it wasn’t a very significant error. I accept it was frustrating and an inconvenience needing to chase ARAG about payment. However, it isn’t suggested that ARAG was disputing cover for the claim or saying that the costs being claimed weren’t covered by the policy. Instead, it was saying that because of the complexities involving other insurance cover it was only liable for a proportionate amount of the costs. Mr S isn’t at fault for any of that, and it shouldn’t have happened, but I’m satisfied the actual impact on Mr S is mainly administrative in nature. On balance, I think £200 is a reasonable amount of compensation for the accepted errors by ARAG. If it hadn’t made such an offer, I’d be minded to award a similar amount in the circumstances. My final decision ARAG Legal Expenses Insurance Company Limited’s offer of £200 compensation is reasonable. I award no further amount to Mr S.

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Under the rules of the Financial Ombudsman Service, I’m required to ask Mr S to accept or reject my decision before 16 April 2026. Ben Williams Ombudsman

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