It has long been recognised that many financial institutions mis-sold PPI products since their inception, many cases and customers were threatened with losing their credit if PPI was not adopted. Worse still, in the majority of cases, those that had PPI were not offered an alternative, or adequate explanation as to why they needed it.
This brought about the compensation claims against banks and financial institutions over the past number of years.
The role of any personal representative is to maximise the value of the estate on behalf of the beneficiaries. With this in mind, a valid PPI claim will often form part of the assets of an estate. Without checking whether there is a valid claim for PPI, there is a risk that the personal representatives could be seen as negligent in their duty.
There has been considerable correspondence within the industry, as to what is the position with regards to personal representatives in administrations of estates, and their duty to enquire and establish whether PPI is part of the deceased estate. If it is, it is simply an asset.
The cut-off date of making claims was the 29th August 2019.
However, this has raised the responsibility of personal representatives to check the above.
There have been two policy changes which this may affect any estate whether in its current form, or indeed having been previously wound up without the PPI position being established.
The official receivers office decision to go back on all bankruptcies to the year 2000, to check whether there were any valid PPI claims, that could result in a further payment to any creditors, and the various industry organisations notes which have been provided, which reasonably suggested that the fiduciary responsibility of the official receiver, in trying to maximise the payments to creditors, are similar to that of an executor/personal representative. As such, the requirements to make checks on all relevant estates became clearer, and the exposure to risk of anybody who had acted as a personal representative, in not doing so has increased significantly.
What is the risk to executors who have already administered, or are in the process of administering an estate?
If checks are not carried out prior to the 29th of August 2019, claims could be made by beneficiaries in relation to a failure of the duties of the Personal Representatives. Logistically any to hit the deadline date, any checks will need to have been started in advance, and probably in our experience to the end of June 2019.
Post the 29th August 2019, banks and other financial institutions, who have been held liable for PPI reclaims, will no longer have this liability, so any claim will have to be borne by the Personal Representative and/or their insurers.
The unknown is how these claims will be proven in terms of validity or what is called quantum (this simply means the value of the claim), as the banks will no longer be required to release the information.
The fear is that the view will be taken that because there was a failure to fulfil the full duties as a personal representative, that no proof will be required, and any quantum may reflect the average pay-outs for PPI claims , which currently stands at just over £2,000.
In order to be completely risk averse, personal representatives, or the firms appointed to deal with the administration of the estate, should check every estate that they have manged post the year 2000, to see if there is a valid PPI claim. As mentioned above the reality is that there is a significant unknown in term of how these claims might come about, be proven or quantified, so some may be prepared to take the risk on.
Prior to the official receiver’s, the markets view was driven by why should a personal representative be required to go beyond what the deceased had done during their lifetime? Therefore, if they hadn’t made a PPI claim whilst they were alive, why would a reasonable personal representative be expected to do so, this may hold, but it has not yet been challenged, or otherwise against a claim hence the unknown, we will be very surprised if during the course of this year, this challenge is not made, so that the common law relating to personal representatives, or their advisors duty to check PPI claims will be established.
We as a company have always taken the view, that every estate should check the PPI position.
We believe it is a duty of the personal representatives, or the firms instructed on behalf of the representatives, to challenge for this information.
It is our experience that PPI claims in estate administrations are very much on the low side, owing to the fact that it is very difficult to obtain the basic information required for financial institutions to make their checks. However, during the past number of years this has become easier, as the banks have adopted systems where only the basic information concerning the deceased would be required to make the appropriate checks, as to any accounts that the deceased may have held or enclosed during the later years of their life.
How do we envision claims management companies adapting once the deadline has now passed? How will this affect estate administration providers, executors or administrators?
Again, there have been several organisations who have produced briefing notes, but claim management companies, after the 29th August 2019, may change their focus to pursuing outstanding claims on behalf of beneficiaries against the fiduciaries involved. The potential argument might be that the fiduciaries, and their advisors, would have been expected to investigate whether estates were entitled to compensation or not.
If you have any concerns please feel free to contact us at the office, and we will be able to answer any questions raised.
