ARAG Legal Expenses Insurance Company Limited · DRN-6114199

The complaint Mr and Mrs N are unhappy with what ARAG Legal Expenses Insurance Company Limited did after they made a claim on their legal expenses insurance policy. What happened In January 2025 Mr and Mrs N sought assistance from their policy following a dispute with a retailer. ARAG asked a panel firm to assess whether the claim had reasonable prospects of success. The firm advised in March the claim was unlikely to be successful. Mr and Mrs N disagreed. I understand a revised assessment was produced in April which was also negative on prospects. The panel firm responded to a complaint Mr and Mrs N made in May. That included a further assessment on prospects which confirmed its previous position. ARAG said it wouldn’t be providing funding for the claim unless Mr and Mrs N were able to provide a positive barrister’s opinion of their own (which it could reimburse the cost of). Our investigator said the prospects assessments in this case had been produced by paralegals. ARAG could rely on those assessments if the paralegals had been under the supervision of a suitably qualified lawyer with experience in the area of law they were considering. But it hadn’t evidenced that was the case here. She said ARAG should arrange for the prospects assessments to be reviewed by a suitably qualified lawyer. She also said Mr and Mrs N had specifically queried supervision arrangements with ARAG and it hadn’t taken appropriate action in response. In recognition of the distress and inconvenience that caused she said it should pay them £300. ARAG argued prospects assessments could be carried out by a paralegal. There was nothing in the legal expenses policy which required that to be done by a qualified solicitor. It clarified the supervision arrangements in place in this case. But it had in any case arranged for the assessments to be reviewed by a solicitor at the panel firm who agreed with them. And it had previously explained the supervision arrangements to Mr and Mrs N. It highlighted an email the panel firm sent them in March 2025 in support of its position and didn’t accept compensation should be paid. Mr and Mrs N didn’t agree either. They thought the policy did require their case to be assessed by a qualified lawyer. And ARAG hadn’t told them whether proper supervision arrangements were in place in relation to the specific advice provided about their claim. They thought that led to the rejection of their claim meaning they were now having to represent themselves in the case they were bringing against the retailer. The proposed compensation didn’t reflect the potential loss of the £2,000 deposit they’d paid the retailer or the time and effort they’d put into trying to pursue the matter. So I need to reach a final 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.

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The relevant rules and industry guidelines say ARAG has a responsibility to handle claims promptly and fairly. It shouldn’t reject a claim unreasonably. It’s agreed Mr and Mrs N’s dispute with the retailer would fall within one of the insured events their policy contains. However, it’s a condition for cover to be provided that “reasonable prospects exist for the duration of the claim”. The policy says that means “for civil cases, the prospects that you will recover losses or damages (or obtain any other legal remedy that ARAG have agreed to, including an enforcement of judgment), make a successful defence or make a successful appeal or defence of an appeal, must be at least 51%. ARAG, or a Preferred Law Firm on their behalf, will assess whether there are Reasonable Prospects”. The policy says a preferred law firm is “A law firm or barristers chambers ARAG choose to provide legal services...” As an insurer isn’t a legal expert we don’t think it’s in a position to carry out that prospects assessment and it should be carried out by a suitably qualified lawyer who has relevant experience. Where that has been done we think it’s reasonable for an insurer to rely on a properly written and reasoned legal opinion when deciding whether a claim has prospects of success. So I think it was right in this case ARAG asked a panel firm to assess that. Mr and Mrs N say it’s a stipulation of the policy the assessment is carried out by a qualified lawyer. I don’t think it is; the policy says it will be done by ARAG or a preferred law firm. And our general approach is the assessment can be carried out by a paralegal as long as they’re working under the supervision of a suitably qualified lawyer with experience in the area of law they’re considering. Our online guidance nevertheless makes clear that suitably qualified lawyer means “i.e. solicitor, barrister, legal executive”. In this case from the information that ARAG has now provided it appears the paralegal who carried out the first assessment was supervised by a Chartered Legal Executive. I’ve read that assessment which I think is properly written and reasoned and so it is one ARAG was entitled to rely on to decline the claim. It doesn’t appear the paralegal who carried out the subsequent assessment was supervised in the same way but I don’t think that makes a difference. ARAG has in any event now arranged for all of the assessments to be reviewed by a qualified and suitably experienced solicitor who said “I can confirm that I agree with the advice that has been given and adopt it as my own”. So I think it was fair of ARAG to say cover wasn’t available for the claim Mr and Mrs N made because the policy requirements in relation to prospects of success weren’t met. I don’t think there’s any further action it needs to take in relation to this issue. However, although ARAG said it would review matters if a positive barrister’s opinion was provided that doesn’t appear to be a requirement of this policy. And our normal approach is that if a customer provides a favourable legal opinion which conflicts with the original legal opinion and is from a qualified lawyer of equal standing, it’s the insurer that should then pay to obtain a barrister’s opinion. But in this case I think it’s unlikely if ARAG had been clearer about the position here that Mr and Mrs N would have acted differently. They told us they were having to represent themselves in proceedings against the retailer because they couldn’t afford any legal representation of their own. I do think ARAG should have made clear to Mr and Mrs N what the supervision arrangements were for the paralegal who carried out the assessments of their claim. I’m not sure if it did obtain full information on this prior to responding to Mr and Mrs N’s concerns as some of those details were only subsequently provided to us. In any case it told Mr and Mrs N the panel firm had “confirmed all prospects assessments are supervised and [ARAG] accept [panel firm’s] confirmation of this on your claim”. But that doesn’t make clear to Mr and Mrs N what supervision arrangements were in place for the specific prospects assessments relating to this claim.

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I’ve gone on to consider the impact of that on Mr and Mrs N. I don’t believe it caused them to lose out on cover that would otherwise have been in place (as they’ve suggested). I’ve already concluded ARAG was entitled to decline their claim on the basis it didn’t have prospects of success. So any issues with the deposit they paid to the retailer don’t result from anything ARAG got wrong. I do accept it will have been frustrating for them to have raised this issue over a sustained period of time and not received a proper response from ARAG in relation to it. That also put them to some unnecessary time and trouble in pursuing the matter. I think the £300 our investigator recommended is appropriate to recognise the impact of that on them. My final decision I’ve decided to uphold this complaint. ARAG Legal Expenses Insurance Company Limited will need to put things right by paying Mr and Mrs N £300. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr N and Mrs N to accept or reject my decision before 3 April 2026. James Park Ombudsman

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