In Saville v Central Capital Limited [2014] EWCA Civ
337, the Court of Appeal upheld an appeal brought by a couple
provided with insufficient payment protection insurance
(PPI) sold in breach of the Insurance Conduct of
Business Rules (the ICOB Rules).
Mr and Mrs Saville entered a 25-year loan agreement with First
Plus following discussions and mediations with a credit broker,
Central Capital (the Broker). The couple obtained
PPI cover to secure their obligations to make interest payments
under that loan agreement. The term of the PPI cover was 5 years.
It was paid for by a lump sum premium, payable in advance, and
financed by a sum added to the loan amount.
It was common ground that in the course of selling the PPI policy,
the Broker breached certain of the ICOB Rules. Primarily, the
Broker failed to properly ascertain, and subsequently assess, the
"needs and demands" of the Savilles regarding the PPI
cover.
The point at issue on appeal was causation: would the Savilles
have purchased the PPI policy from the Broker if it had not failed
to properly assess the Savilles' needs and demands in breach of
its statutory duty to do so?
The Court Of Appeal found that "there was no material from
which it could be properly deduced that a 5 year policy [covering
obligations relating to a 25 year loan agreement] was suitable for
the Saville's needs or demands". It was held that "a
fair question designed to elicit the Savilles' demands on the
length of policy would have resulted in the insurance not being
sold", as the Savilles would have requested cover for the
duration of the loan period. The Broker could not have provided
such cover as the only PPI policy the Broker could offer relating
to loans with First Plus was a 5-year policy. Accordingly, the
Broker's breach of ICOB rules was causative to the loss (in the
form of the lump sum premium added to the loan amount) suffered by
the Savilles.
This decision highlights the need for clear, fair and open
questions to be posed to potential insureds under PPI policies to
determine the appropriateness and adequacy of cover.
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