In Saville v Central Capital Limited [2014] EWCA Civ 337, the Court of Appeal upheld an appeal brought by a couple provided with insufficient payment protection insurance (PPI) sold in breach of the Insurance Conduct of Business Rules (the ICOB Rules).

Mr and Mrs Saville entered a 25-year loan agreement with First Plus following discussions and mediations with a credit broker, Central Capital (the Broker). The couple obtained PPI cover to secure their obligations to make interest payments under that loan agreement. The term of the PPI cover was 5 years. It was paid for by a lump sum premium, payable in advance, and financed by a sum added to the loan amount.

It was common ground that in the course of selling the PPI policy, the Broker breached certain of the ICOB Rules. Primarily, the Broker failed to properly ascertain, and subsequently assess, the “needs and demands” of the Savilles regarding the PPI cover.

The point at issue on appeal was causation: would the Savilles have purchased the PPI policy from the Broker if it had not failed to properly assess the Savilles’ needs and demands in breach of its statutory duty to do so?

The Court Of Appeal found that "there was no material from which it could be properly deduced that a 5 year policy [covering obligations relating to a 25 year loan agreement] was suitable for the Saville’s needs or demands”. It was held that “a fair question designed to elicit the Savilles' demands on the length of policy would have resulted in the insurance not being sold”, as the Savilles would have requested cover for the duration of the loan period. The Broker could not have provided such cover as the only PPI policy the Broker could offer relating to loans with First Plus was a 5-year policy. Accordingly, the Broker’s breach of ICOB rules was causative to the loss (in the form of the lump sum premium added to the loan amount) suffered by the Savilles.

This decision highlights the need for clear, fair and open questions to be posed to potential insureds under PPI policies to determine the appropriateness and adequacy of cover.