ARAG Legal Expenses Insurance Company Limited · DRN-6172027

The complaint L, a company, complains about ARAG Legal Expenses Insurance Company Limited’s decision to turn down a legal expenses claim. L is represented by Mr L. What happened L holds legal expenses cover with ARAG. Mr L made a claim under the policy as he wanted to take legal action against a third party (that I’ll call G). ARAG accepted the claim and referred it to its panel solicitors for advice on whether the legal action had reasonable prospects of success, as required under the policy terms. The solicitors told ARAG that the claim related to intellectual property rights, which was excluded under the policy. ARAG reassessed the claim and made the decision to decline the claim. It therefore withdrew cover. Mr L complained about ARAG’s decision. ARAG offered to approach the panel solicitors again and ask that they compose instructions to counsel, with Mr L’s input. It said counsel could be asked for their advice on whether the claim was related to intellectual property (or another part of the wider exclusion that included intellectual property). Though it said if counsel did confirm the claim was related to intellectual property (or another part of the wider exclusion), then Mr L would be liable for the counsel’s fee. Mr L didn’t take up ARAG’s offer. ARAG then issued a final response to the complaint. It maintained its decision to decline the claim but said that it ought to have looked into the claim further initially rather than accept it. ARAG offered Mr L £100 compensation for any inconvenience he’d been caused by its handling of the matter. Unhappy with ARAG’s response, Mr L brought a complaint to this service. Our investigator looked into the complaint but didn’t recommend it be upheld. She thought it had been reasonable for ARAG to conclude that the claim fell under the intellectual property exclusion based on the solicitors’ explanation. She noted ARAG had offered to pay Mr L £100 compensation for not giving more consideration to whether the claim was covered at the outset, and she thought this amount of compensation was reasonable. Mr L didn’t accept our investigator’s findings and so the matter has been passed to me for a 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. Mr L has provided a number of points in support of his complaint, though I’m not going to address every point that’s been made. That’s not meant as a discourtesy, it simply reflects the informal nature of this service.

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Industry rules set out by the regulator (the Financial Conduct Authority) say insurers must not unreasonably reject a claim and should handle claims promptly and fairly. I’ve taken these rules, and other industry guidance, into account when deciding what I think is fair and reasonable in the circumstances of L’s complaint. The policy includes cover for contract disputes. However, the policy has the following exclusion: ‘Any claim relating to patents, copyrights, trademarks, merchandise marks, registered designs, intellectual property, secrecy and confidentiality agreements.’ The solicitors told ARAG that the subject matter of the dispute was the use and rights over L’s photos. So, the solicitors thought the claim related to intellectual property. ARAG reassessed the claim and concluded that it fell under the above exclusion. Mr L argues that the issue doesn’t relate to the enforcement or ownership of intellectual property. He says his concerns on behalf of L relate solely to a breach of contract arising from G’s failure to perform its obligations under a commercial agreement. He points out that G’s own characterisation of the dispute doesn’t mention intellectual property. ARAG sought further guidance from the solicitors about the nature of L’s claim, which it was entitled to do. The solicitors still thought the claim revolved around L’s intellectual property rights and whether they were infringed by G. They pointed out that when making the claim, Mr L had even referred to the misuse of his/L’s intellectual property by G. Although I appreciate G hasn’t specifically mentioned intellectual property in its correspondence with Mr L, I think it was reasonable here for ARAG to rely on the solicitors’ explanation that the claim related to intellectual property, and to subsequently decline the claim. Whilst Mr L considers the exclusion is directed at claims about intellectual property, the exclusion says a claim isn’t covered if it is relating to intellectual property. I’m satisfied the available evidence supports that the claim for breach of contract does relate to intellectual property and therefore the exclusion applies. I don’t agree with Mr L that the wording is ambiguous. As Mr L had referred to the misuse of intellectual property when making the claim, ARAG accepted it ought to have looked into this further at the time. It therefore offered Mr L £100 compensation for this. I think this amount of compensation was reasonable to reflect the disappointment Mr L was caused by ARAG initially accepting the claim in error, only to withdraw cover the following month. Mr L is unhappy the solicitors asked ARAG if the claim was covered given the intellectual property exclusion. He thinks the solicitors acted outside their remit. However, the solicitors are a separate firm of professionals to ARAG with their own set of rules and a different regulator. So, any concerns about the actions of the solicitors would need to be directed to them in the first instance and then if Mr L is unhappy with the response, he can take his complaint to the Legal Ombudsman if he wishes. Mr L has also raised concerns that the policy may not have been suitable for L, given the nature of L’s business. If he’s unhappy about the sale of the policy, he should raise this as a new complaint on L’s behalf to the seller of the policy.

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My final decision ARAG Legal Expenses Insurance Company Limited has already made an offer to pay £100 to settle the complaint and I think this offer is fair in all the circumstances. So, my decision is that ARAG Legal Expenses Insurance Company Limited should pay L £100. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr L on behalf of L to accept or reject my decision before 20 May 2026. Chantelle Hurn-Ryan Ombudsman

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