LMB INSURANCE SERVICES LTD · DRN-5879295

The complaint A limited company, that I will refer to as H, has complained that it was mis-sold its business insurance policy by LMB INSURANCE SERVICES LTD. What happened LMB arranged H’s insurance as its broker from 2019. In early 2022, substantial construction works were being carried out in the vicinity of H’s premises. As a result, hoarding was put around the premises, which H said impacted its business. I understand H’s customers could still access the premises, but had to use a side entrances and it was not visible from the footpath. H submitted a claim under its insurance policy for business interruption losses as a result of the drop in custom. The insurer said there was cover for losses arising from denial of access to the business premises, but that clause would only operate if the denial of access was due to damage to H’s premises, which was not the case here; and there was no cover under any other section of the cover either. H complained about that and one of my colleagues considered that complaint. They did not think that the insurer had acted unfairly, as there was no section of cover that would respond to the circumstances of this claim. H then submitted a complaint to LMB that it mis-sold the policy, as it says it could have applied for non-damage denial of access cover. It also said the sum insured for loss of gross profit was reduced form £500,000 in 2020 to £50,000 in 2021, which means there would also not have been adequate cover for its claim. LMB does not accept it mis-sold the policy. It says the insurance provider changed and the previous cover had been for loss of revenue and the new one for loss of profit, which is why the sum insureds were different. LMB also says that no policy would have covered a business interruption claim for the circumstances that apply here, therefore whatever level of cover or type of cover that was provided (so even if it included non-damage denial of access) it would not have covered the claim. In April 2024, H also asked LMB to submit a claim to the insured or damage to its outdoor seating area as a result of the construction works. It wanted to claim £10,000 but then found the cover under the tenant’s improvement section was limited to £1,000. So, H has also complained about this. LMB said when H first asked it to arrange cover, it asked for cover on the same basis as the policy it previously held, which included tenant’s improvements cover of £1,000 so this is the amount it obtained cover for in 2019. LMB also says the level of cover was clearly set out in the policy documents provided to H. H remained unhappy with LMB’s response, so referred the matter to us. One of our Investigators looked into the matter. He did not recommend the policy be upheld.

-- 1 of 4 --

He said there was no loss regarding the outdoor area, as H had the repairs done free of charge and there was no reliable evidence that any other policy would have provided the cover for this claim. H does not accept the Investigator’s assessment. H says LMB visited the premises and was informed it had spent £100,000 kitting out the premises, so the level of tenant’s improvement cover should have been set at £100,000. If there had been a more significant damage claim, then it’d have been significantly out of pocket. LMB also amended the basis of the cover without any explanation. LMB failed to identify its needs and failed to advise and arrange insurance suitable for it. In addition, H says that LMB told it that there were grounds for submitting a claim to the insurer for the business interruption, which contradicts its assertion now that no insurance policy would cover the circumstances that happened here. H feels let down by LMB’s poor advice. H says that if suitable cover been arranged, or had the risks of underinsurance been clearly explained, it would have acted differently; and the loss suffered was entirely foreseeable in a hospitality premises. As the Investigator has been unable to resolve the complaint, it has been passed to me. 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. I can see that H has been significantly impacted by the construction works and I have every sympathy with the position the directors have been put in and the loss they’ve experienced. However, having considered the matter very carefully, I do not consider that LMB is responsible for the fact it has not been able to claim for its losses. I will explain why. Business interruption cover Those selling insurance have a responsibility to provide clear information about the cover being provided, in order to put the customer in a position where they can make an informed choice about the insurance they are buying. This includes providing clear information about the main cover and any significant terms. If the seller is also making a recommendation or advising a customer to take a particular policy, then they also have to take steps to try and ensure the policy is suitable for them, or explain if it is not. LMB says the policy provided reflected H’s instructions but that, in any case, no other business interruption policy would provide cover where there is no damage, as a result of construction work to another property. H has provided an email from its new broker that says a “typical Non Damage Business Interruption Section would have paid out in the circumstances” of the claim and an extract from a policy that it says supports this. H also provided a publication from another insurer about the type of non-damage business interruption covers available. H also said it had received cover for a claim for business interruption during the Covid-19 pandemic, which did not require damage to the property. I have considered this carefully. The publication provided lists possible non-damage business interruption risks that could potentially be covered. They include cyber-attacks that might impact a business’ operation, pandemics, outage of networks, terrorist events and closure due to murder, suicide, poisoning or infectious diseases. These all require an

-- 2 of 4 --

unforeseen event and there is no mention of any potential cover being available for the consequences of planned construction works being carried out nearby, which do not actually prevent access to the insured premises. I have also considered the alternative policy referred to by H. Having done so, I think it is clear this provides that any hindrance of access to the insured premises (that is not caused by physical damage) would have to be the result of restrictions imposed by a public authority, as a result of certain specified events. This does not apply here. H’s premises remained open and accessible, albeit through a side door. No business interruption policies I am aware of will cover the impact of planned construction works by another property owner, which does not cause physical damage or entirely prevent access to the insured’s premises. Given all this, while I have great sympathy for H’s position, even if LMB did not carry out its duties as a seller of insurance properly (which I do not make any finding about), I do not consider that it is responsible for H not being able to claim for the business interruption losses it suffered because there is no reliable evidence that there would have been cover available for the circumstances that happened here. I note H also says LMB’s comments and actions have been contradictory, as it initially supported H’s insurance claim and said it could see no reason for H not to claim under the policy. I can see H’s point about this and can understand the frustration. However, the fact remains that I do not think there is any other policy that would likely have met this claim. Level and basis of business interruption cover H is also unhappy that the basis of the business interruption cover was changed without any explanation and it is concerned the cover was not at the right level. As there was no valid business interruption claim and therefore no loss as a result of the alleged deficit in cover, I do not consider I need to make any finding about this. I say this because I can only make awards to reflect any loss caused to the complainant by a wrongdoing on the part of the business. I cannot fine or punish a business. Tenant’s improvement cover For the same reason, I do not consider I need to make any findings about whether LMB did anything wrong when setting the level of cover for tenant’s improvements cover at £1,000. Again, this is because, as the Investigator explained, H accepted an offer from contractors to carry out the repairs to the outdoor area free of charge. This means there is no financial loss and so no likely award I could make in any event. So even if LMB did fail to advise properly about the level of cover for this section of cover, there is no award I could make to reflect that. My final decision I do not uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask H to accept or reject my decision before 22 April 2026. Harriet McCarthy

-- 3 of 4 --

Ombudsman

-- 4 of 4 --