The FSA has published a statement on the use of the phrase 'consequential loss' in consumer general insurance contracts. The phrase is commonly used to exclude insurer's liability for losses that are an indirect result of insured events. The regulator believes that a contract term which excludes liability for consequential loss carries a legal meaning which is not necessarily understood by consumers. As the Office of Fair Trading (OFT) have commented 'the technical meaning of "consequential loss" is unknown to most people' and the phrase falls foul of of the Unfair Terms in Consumer Contracts Regulations 1999. Under UTCCR 1999 firms must ensure that they express any written term of a standard-form consumer contract in plain, intelligible language.

In order to ensure that firms comply with the requirements of the regulations the FSA has published some possible examples of terms which have the affect of excluding remote loss whilst avoiding legal terminology.

For further information: FSA's statement on the use of the term 'consequential loss'