PPI and deceased estates: the next chapter

Payment protection insurance (PPI) is one of the most mis-sold products in British financial history. Banks have refunded to their customers more than £30bn in compensation so far and billions of pounds that have been set aside by financial institutions still remain unclaimed. To stop the haemorrhaging of cash from their balance sheets, the banks persuaded the Financial Conduct Authority (FCA) to call time on bringing a PPI claim. The deadline of 29 August 2019 for submitting claims for compensation for the mis-selling of PPI is fast approaching. After that date, hopefully we will never have to see or hear Arnold Schwarzenegger on our TV screens or radio broadcasts as a puppet shouting, “Do it now”. But is there a danger we’ll hear him say, “I’ll be back”? There is a concern that after the 29 August claims management companies will shift their focus and target executors and administrators and their advisers who may have failed to investigate or submit claims on behalf of deceased clients; and will seek compensation on behalf of beneficiaries.

As an executor or administrator of a deceased person, it is their duty to identify all assets due to the estate, and this could include a PPI repayment. Many deceased clients will have taken out insurance policies during their lifetime, such as PPI, to protect their family from debt if they were to pass away. Many deceased clients would also have had loans, credit cards or a mortgage between 1990 and 2010 so there is a strong chance they had PPI. Families often discover their deceased relative had taken out PPI during the onerous task of sifting through their financial papers while reviewing paperwork for their credit and store cards, mortgage statements, overdraft facility letters or catalogue debts.

However, it is clear that many individuals and firms involved in administering a person’s estate overlook, or may not have considered, making a claim for mis-sold PPI. In the potential firing line post-29 August from claims management companies are:

— Executors or administrators of a deceased person’s estate;

— attorneys dealing with and managing an individual’s finances via an enduring power of attorney or lasting power of attorney; and

— deputies appointed by the Court of Protection. Solicitors who are either appointed as executors, administrators, attorneys, or deputies themselves, or are advising those individuals, may find themselves or their firms subject to professional indemnity claims in future if PPI claims have not been fully investigated and made. As a consequence of this, could a flood of claims against solicitors’ firms lead to an increase in their professional indemnity insurance premiums in the future?

HOW FIRMS CAN PROTECT THEMSELVES

The Society of Trust and Estate Practitioners (STEP) published a briefing note on this issue back in April 2019; but as the deadline rapidly approaches, many firms may still be exposed to a potential claim. A review of their closed files and active files may urgently need to be undertaken. The mis-selling of PPI has been known about for years and claims have been successfully brought by family members of those who have died as long ago as 1989. The Official Receiver has reviewed and considered PPI claims in relation to closed bankruptcy cases as far back as 1 January 2000. STEP’s advice in its briefing note suggests that solicitors mirror the stance taken by the Official Receiver and review their files from 1 January 2000 to reduce the potential for claims being brought against firms from disappointed beneficiaries. Reviewing 19 years’ worth of files that may need to be urgently looked at is no easy or quick task and I pity trainee solicitors in their private client seat who may be undertaking this exercise at the request of their superiors.

MITIGATING THE RISK OF A CLAIM

Solicitors who are dealing with probate or the administration of a deceased’s estate should enquire whether the deceased person had a right to a refund and or compensation in relation to mis-sold PPI. Failure to do so may mean the solicitor and or their firm could be liable to the beneficiaries of the estate. To ensure solicitors are protected and all necessary investigations relating to any potential PPI claims have been covered, these steps should be followed: 1 If a new matter is being taken on and an engagement letter has not yet been issued, it might be prudent to consider carving out responsibility for pursuing PPI claims for the deceased where a partner or member of a law firm does not act as an executor. STEP suggests inserting a clause into engagement letters which either includes or excludes responsibility to check the estate for PPI, in accordance with instructions from the underlying client. 2 If the engagement letter has already been issued without a carve out, or where a partner or member of a law firm acts as an executor or administrator, an urgent review of the deceased’s papers needs to be undertaken for any potential loan/ credit agreements and any indication that insurance was sold with those agreements. 3 There is a wealth of information online to assist in these tasks and there is a list of agreements/facilities where PPI was frequently mis-sold at www.financial-ombudsman.org.uk/ppi/what-is-ppi.html. 4 A search should be undertaken of the FCA website for the appropriate contact details of each institution with which the deceased held any agreements or facilities where PPI may have been mis-sold. 5 Solicitors should have a PPI letter template prepared which they can quickly send to each of the institutions. Given the pending deadline, this will have to be done as soon as possible. There are plenty of specimen template letters available online including on the FCA website. 6 Following any response, the papers will need to be reviewed to identify if any payments were made that constitute PPI. A list of such payments which may have been labelled as where PPI could have been mis-sold can be found at www.financial-ombudsman.org.uk/ppi/ what-is-ppi.html. 7 If any potential agreements are located and identified, a complaint will need to be made and submitted to each institution. The FCA website contains details of how to make a complaint to each institution.

URGENT STEPS TO TAKE WHERE A PPI CLAIM IS IDENTIFIED

The first step is to identify who can officially make a claim on behalf of a deceased person. If the deceased left a will, the executor will be entitled to bring a claim. If there is no will, the administrator or next of kin will be entitled to bring a claim. The institution will, however, require evidence that the person submitting the claim is entitled to do so. Solicitors will need to provide, on behalf of their clients or themselves if they are dealing with the administration of the estate, the following:

— A certified copy of the death certificate;

— Certified identification documents of each of the executors or administrators;

— A certified copy of the deceased’s will (if there is one);

A court sealed copy grant of probate;

— If there is no will, a copy of the court sealed letters of administration. In most cases, the process for submitting a claim for a PPI is the same as an individual doing it for themselves. The process is set out clearly on the FCA website. Just in case you need a further reminder, this all needs to be done before the 29 August 2019. “Do it now!”

Matthew Duncan is a partner at Druces druces.com