Changes to the Legal Ombudsman Rules: what do they mean for law firms and their insurers?

When do the changes come into effect?

The changes come into force from 1 April 2023.

What are the changes?

The three main changes are outlined below.

Rule 4: time limits to initiate a complaint

From 1 April, a complaint to the Ombudsman must be made no later than:

• One year (currently 6) from the date of the act or omission being complained about, or
• One year (currently 3) from the date when the complainant should have realised there was a cause for complaint

However, Rule 4.7, which gives the Ombudsman discretion to extend the one year time limit when it considers it is fair and reasonable to do so, remains unchanged.

Rule 5.7: discretion to dismiss or discontinue complaints

The four key changes allow the Ombudsman to dismiss or discontinue a case where:

• Rule 5.7(a) – the complaint “does not have any reasonable prospects of success”, the words “or is frivolous or vexatious” have been removed from the existing rule
• Rule 5.7(b) – the complainant has not suffered, and is unlikely to suffer, significant financial loss, distress, inconvenience and detriment (although those terms are not defined)
• Rule 5.7(c) – the complainant has been offered and/or accepted a fair and reasonable redress to resolve the complaint
• Rule 5.7(p) – it would not be proportionate to investigate a complaint due to its size or complexity or the behaviour of the complainant, or
• Rule 5.7(q) – there has been undue delay in bringing the complaint; e.g. where the complainant has sought to introduce new issues which it knew about when an ongoing investigation commenced

Rule 5.19(c): discretion to decline to issue a formal Ombudsman decision

Using an amended version of the existing Rule 5.20 provision, the Ombudsman will have the discretion to treat a complaint as “resolved” and determine that a final decision is not needed where neither party provides any substantive reasons for disagreeing with the investigator’s findings.

Implications for law firms and their insurers

On the face of it, the changes to the time limits are a welcome development for law firms and their insurers. However, in practice, they may result in an increase in formal claims where clients fail to issue a complaint within one year. This could mean that some complaints which might otherwise have been  “nipped in the bud” under these new Rules, end up escalating once the Pre-Action Protocol has been engaged.

However, the changes to Rule 5.7 should mean that the Ombudsman will have clearer grounds for dismissing certain complaints without the need for a full investigation. Currently a complaint can only be dismissed if there is a “compelling” reason. The removal of the words “frivolous and vexatious” from Rule 5.7(a) is designed to result in less upset and frustration to complainants and should, in theory, mean that the Ombudsman can dismiss a claim purely on the basis that it is without merit. Hopefully this will result in more spurious claims being dismissed at a much earlier stage which should save law firms and their insurers significant time and cost.

The introduction of the word “significant” within Rule 5.7(b) is again a welcome development on the face of it as currently a complaint can only be dismissed if there has been no loss or detriment at all. However, it remains to be seen what loss or detriment the Ombudsman will consider to be “significant”. Hopefully further guidance will be published but it could be a very subjective test and it may be difficult to determine what should be considered significant; what a complainant feels is significant to their own circumstances could be very different to that of the Ombudsman.

The changes to Rule 5.7(p) also provide the Ombudsman with the discretion to dismiss a complaint where it considers that it would be disproportionate, unreasonable or even impossible for it to investigate, but it has pointed out that this rule will only apply to a very small proportion of cases.

Further guidance is expected.

What immediate steps do law firms need to take?

Law firms should inform their clients of the new time limits for bringing a complaint before 1 April by, for example:

• Amending client care letters and Terms of Business
• Amending any formal complaints policies and procedures, and
• Updating any signposting on the firm’s website and/or any relevant guidance documents

Given the risk of missing the one year deadline, it is important that clients are aware of the new rules.

The Ombudsman has suggested text for client care letters and complaints handling procedures which can be found on its website. Alongside that, our specialist Insurance Disputes solicitors would also be happy to discuss the changes in more detail.

There are further minor changes to the rules which aren’t dealt with in this article, but we would encourage all firms to make themselves aware of the developments and to review the guidance notes and FAQs on the Legal Ombudsman’s website.