Insurers face payouts for ash cloud compensation

Insurers are preparing for a flood of payouts for ash cloud compensation after a policyholder won a legal battle that the disruption could be classed as ‘weather related’.

Former lawyer Clive Tucker took Insure and Go, who were underwritten by Europ Assistance, to Yeovil County Court after the insurers refused to pay out for his costs.

He had been stranded in Mexico, because the ash crisis was not a weather-related issue.

The insurer this month paid out a total of £1009 after the court backed Tucker, according to the Travel Trade Gazette.

The small claims court victory is set to be used by the Financial Ombudsman Service (FOS) in negotiations with underwriters covering claims by hundreds of customers.

Although the small claims court does not set a legal precedent, it follows a provisional decision made by FOS in another case covering delays caused by the ash cloud where it ruled that ash should be seen as weather related.

The insurer in that case wanted to test the issue in the courts before paying out, but it is understood that FOS may now point out that an insurer has already accepted the principle in a lower court.

A FOS spokeswoman said it had about 600 complaints from consumers on its books and hoped to make a final ruling covering them soon pending further discussions with insurers.

Consumer rights organisation Which? said if FOS did rule that ash should be classed as weather related it would lead to payouts to significant numbers of customers.

The ABI said insurers had taken different views over whether ash cloud should be seen as weather related and welcomed the prospect of a definitive legal ruling.