Background to PPI Claims
The Payment Protection Insurance (“PPI”) claims scandal has not been far from the news for the last decade. Most people will be aware of the basis of such claims. We have all been the recipient of incessant mail shots and phone calls!
PPI was to cover repayments for individuals who found themselves in an unexpected position, such as suffering a work accident or falling ill. PPI was attached to personal loans and business loans, credit cards, store cards, mortgages and various types of credit. It is estimated that around 64 million PPI policies were sold to consumers.
PPI was often mis-sold without adequate explanation being given as to what it covered. There was a perception that consumers felt pressured into taking out PPI, when it was not suitable for their specific circumstances.
There are two strands to a PPI claim. If the PPI policy was mis-sold, then the consumer is entitled to recover the costs of the PPI premium plus interest. In addition, if the lender obtained a high commission (over 50% of the PPI premium) for the sale of the PPI policy, then the consumer is entitled to recover that commission over 50%, even if the PPI policy was not mis-sold (Plevin v Paragon Personal Finance Limited  UKSC 23).
In 2010, the FCA set out clear guidance on how claims against lenders should be pursued and how the lenders should deal with those claims. As a result, there have been over 24 million successful claims and over £35 billion paid out in settlement of claims by the lenders.
There is now a deadline beyond which claims cannot be made. That deadline is 11.59pm on 29 August 2019.
The Issue for Probate Solicitors
With the PPI deadline on the horizon, claims management companies are now looking for the next big thing to replace it. They may well attack IFAs etc. who have failed to advise to make a claim in time. However, we understand that claims farmers are turning their attention to probate practitioners and their failure to advise about PPI…
This concern has been echoed by The Society of Trust and Estate Practitioners (“STEP”).
STEP has advised that personal representatives might want to carry out a review of all matters they have dealt with post 2000 and check whether a PPI claim could be pursued – or should have been!
The Legal Position
Is it within the scope of a solicitor appointed as a personal representative or providing advice during the administration of an estate to pursue a PPI claim or investigate the possibility of doing so? That will depend on the terms of any retainer. In a perfect world there would be a clause in the engagement letter which specifically deals with whether the solicitor has a responsibility to check the estate for PPI. We doubt that this has often been the case.
However, generally, the personal representative must act in the best interests of the estate in realising assets belonging. Without a specific exclusion in the retainer we would expect an investigation into the possibility of a PPI claim to be within scope of duty.
It could be argued that it would be an overly onerous and expensive job for a solicitor to trawl back through the entire financial history of the deceased in the hope that there may be a PPI claim. The average PPI claim settlement is in the region of £2,000. A sum that could easily be eroded by the costs of a solicitor carrying out the necessary investigations.
Where this argument potentially falls down is the existence of claims management companies who (for a commission on any damages recovered) were prepared to do all the leg-work. Claims management companies are already offering their services to personal representatives to investigate PPI claims. It could have been relatively simple and inexpensive for a solicitor to ascertain whether the deceased had a PPI claim.
Causation arguments may look initially attractive but…it could well be difficult to argue that, when advised of the potential to consider a PPI claim, the beneficiaries of an estate would have not taken that opportunity. The process was simplified by the FCA to such an extent that it was always worth, at least, investigating the position.
Not all is lost. Of the 30 million claims that were brought, around 4.5 million were unsuccessful. In any claim against a solicitor, the claimant will need to show that the PPI claim would have been successful. Loss of chance arguments may be helpful but not easy.
The average recovery made under a PPI claim was in the region of £2,000. A claims company would have charged commission of around 20% and the effects of Inheritance Tax also need to be taken into account. A claim which may seem to have been worth £2,000 may well be halved.
Potential claims brought against solicitors are likely to be low value and fall within any policy excess; subject to the level of that excess and any applicable aggregate excess. Where there are low aggregate excesses Insurers may well be called on to indemnify. If most claims are within an excess, then Insureds may well want some professional support in dealing with the claims.
It may be that the claims farmers are discouraged by the low amount at stake, especially if difficult enough barriers are put in their way.
As there were around 64 million PPI policies sold, it is the potential volume of claims that may follow coupled with the relatively weak defences to the claims, which is likely to be of concern to insurers.
Notification and aggregation?
The likelihood is that solicitors who have not routinely investigated PPI claims on behalf of an estate will simply bulk notify as circumstances all the files where no such claims were investigated and hope that no claim is ever pursued – an entirely unsatisfactory position.
There is potential that solicitor insureds may try to argue that all claims relating to the failure to pursue PPI claims on behalf of an estate should aggregate. The MTC states that “the same act or omission in a series of related matters or transactions” will be treated as “one claim”.
Following the recent Supreme Court judgment although the same act or omission will have been carried out on all the individual probate matters, there will be a lack of some identifiable substantive link or connection between the probate matters beyond mere similarity and the matters do not fit together in any way. Therefore, unless it can be shown that there was a link between the individual estate administrations (e.g. linked family wills), it is unlikely that the claims will aggregate.
What Happens Now?
It is likely that if a probate practitioner has failed to identify the need to investigate potential PPI claims on behalf of an estate and such claims were available to the estate on one probate matter, then the practitioner will have failed in the same way on all or most of their probate matters.
Despite the warnings given by STEP it is inevitable that some solicitors will have fallen through the net and that, with the support of claims management companies, claims from disappointed beneficiaries will follow. Insurers can expect bulk notifications of circumstances from solicitors, who only become alive to their error after the PPI claims deadline has passed.
As with any high-volume litigation, careful management of claims is crucial to minimise exposure; especially, in circumstances where it appears that liability will attach. A strategy needs to be in place to deal with the claims using a consistent approach and a mechanism for ascertaining whether a claim against the solicitors is valid (i.e. was there ever a valid PPI claim) and then the swift resolution of that claim making the necessary reductions for any commission and/or IHT that would have been payable on the damages recovered. We are working on a claims handling protocol to assist. It is important to limit the level of costs incurred in defending the claims and the costs which will be sought by high charging claimants’ solicitors.
It is the careful management of claims, which will be key to limiting the impact that such claims have on solicitors and their insurers.
If you have concerns about the issues covered by this article or you would like to discuss those issues further, please speak to your contacts at Plexus:
Sarah Cornish, Partner
T: 0207 220 5939 | M: 07779 437 814 | E: email@example.com
Peninsular House | 30-36 Monument Street | London | EC3R 8NB
Gordon Walker, Partner
T: 0113 223 8331 | M: 07557 036 901 | E: firstname.lastname@example.org
Joseph’s Well | Hanover Walk | Leeds | LS3 1AB
Paul Methan, Partner
T: 0161 244 6930 | M: 07790 341 720 | E: email@example.com
City Tower | Piccadilly Plaza | Manchester | M1 4BT
Tamsin Hyland, Associate Solicitor
T: 0207 220 5918 | M: 07977 008 748 | E: firstname.lastname@example.org
Peninsular House | 30-36 Monument Street | London | EC3R 8NB
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