Tribunal hands down “seismic” ruling on leaseholder insurance

CII veteran raises big questions for the industry

Tribunal hands down “seismic” ruling on leaseholder insurance


By Terry Gangcuangco

A First-Tier Tribunal Property Chamber has handed down what a UK insurance industry veteran considers a “seismic” ruling that raises a lot of questions for the sector.

In the case, which centred on leaseholder insurance premiums for 1-80 Hollin Bank Court in Blackburn, the respondent’s camp failed to prove that the premiums were reasonable or competitive.

Referring to Tim Wilson and Chris Dines, the Tribunal said: “In respect of their responses and evidence as to processes applied to ensure fair and competitive insurance premiums, the Tribunal found their evidence to be lacking transparency, economical as to disclosures, contradictory, and lacking credibility.

“In short, we do not find that the Tribunal was presented with the evidence required to show that the premiums charged were reasonable and not artificially inflated by the connected nature of the various parties or the adoption of a portfolio insurance approach.”

Part of the judgment also noted: “As it stands, the Tribunal has not been presented with one item of documentary evidence to suggest that the insurance premiums for the building are competitive.”

It was ruled that repayments (worth around half of the premiums) be made for the years 2021, 2022, and 2023.

Following the decision, Chartered Insurance Institute veteran Branko Bjelobaba (pictured) asserted: “Broker Gallagher provided advice to a freeholder to enable them to overcharge leaseholders by 145% and use a captive in order to maximise their income.”  

He went on to comment: “I consider this a seismic judgment and shows how the past work of brokers can be examined in great detail should leaseholders feel that they have been overcharged.

“Their advice as to how and where to place (including any captive arrangements), what alternative quotations are sought, the state of the risk, etc., were all examined in minute detail and, in this case, the interests of leaseholder were not considered (which is in breach of the 1985 Act and in addition to the Financial Conduct Authority’s integrity principle).”

Update: Gallagher comments on ruling

In an emailed statement, a spokesperson for Gallagher commented on the ruling, and said: “The ruling in question relates to a recent tribunal between a leaseholder and their freeholder, the latter a party to whom Gallagher provides certain insurance intermediary services.

“While a Gallagher broker was asked to provide information on three discrete points in relation to the matter, Gallagher was not a party to the proceedings and did not determine which evidence was presented to the tribunal. As such, it would not be appropriate to comment further.”

For Bjelobaba, the tribunal outcome raises a lot of questions for the industry.

He stated: “There are 5.2 million leasehold properties in England and Wales, and I am wondering how prevalent advice of this nature has been (to include excessive commissions, unfair kickbacks, and captive arrangements) before the new rules kicked in?

“Leaseholders deserve reassurance that they have not been exploited, and there will be demands for significant compensation if they have, and rightly so. The FCA should be asking for assurance as to previous advice and conduct and, if wrongdoing is found, then they should be ready to take enforcement action as many firms and individuals will have profited.”

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