Legal and General Assurance Society Limited · DRN-6229734

The complaint Mrs M complains that Legal and General Assurance Society Limited (L&G) didn’t agree to pay her proportionate incapacity benefit after she made a claim on a personal income protection insurance policy. What happened The circumstances of this complaint are well-known to both parties. So I’ve simply set out a summary of what I think are the key events. Mrs M holds a personal income protection insurance policy which provides cover if she’s incapacitated from working in her own occupation for more than 13 weeks due to illness or injury. In November 2024, Mrs M had an accident and suffered severe fractures to her foot, which required surgery. She was unable to work and so she made a claim on the policy. L&G accepted Mrs M’s incapacity claim. It paid her benefit for an eight day period after the policy deferred period had ended because Mrs M had returned to work. However, while Mrs M’s role was based on-site, she arranged a contract variation with her employer for a short period of time. The variation reduced Mrs M’s hours by 50% and amended some of her duties, allowing her to work from home while she recovered. This meant Mrs M’s pay dropped by 50%. So she asked L&G to pay her proportionate benefit while she worked from home. L&G didn’t agree. It considered the option of its Vocational Clinical Specialist (VCS) who’d spoken to Mrs M during the life of the claim. The VCS felt that the main barrier to Mrs M returning to her role full-time was the difficulty she’d face in commuting to work. L&G concluded that there wasn’t medical evidence which showed Mrs M was totally incapacitated from carrying out her insured role. And it concluded that a difficulty in commuting wasn’t a clinical reason for Mrs M to be unable to return to work full-time. So it didn’t think Mrs M’s claim for proportionate benefit was covered by the policy terms. However, L&G accepted that there had been delays in its handling of the claim and so it paid Mrs M £350 compensation. Mrs M was unhappy with L&G’s decision and she asked us to look into her complaint. Our investigator didn’t think L&G had treated Mrs M fairly. She thought the evidence indicated that Mrs M’s injury had resulted in her being unable to carry out her full-time insured occupation. So she recommended that L&G should pay Mrs M proportionate incapacity benefit, together with interest. And she also thought L&G should pay Mrs M an additional £200 compensation. L&G disagreed and so the complaint’s been passed to me to decide.

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What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so, I don’t think L&G has handled Mrs M’s claim fairly and I’ll explain why. The relevant regulator’s rules say that insurers must handle claims promptly and fairly. And that they mustn’t turn down claims unreasonably. I’ve taken those rules into account, amongst other relevant considerations, such as regulatory principles, the policy terms and the available evidence, to decide whether I think L&G treated Mrs M fairly and reasonably. I’ve first considered the policy terms and conditions, as these form the basis of the contract between Mrs M and L&G. Mrs M made an incapacity claim on the policy, so I’ve considered L&G’s definition of ‘own occupation’ incapacity. This says: ‘If you are in gainful employment or gainful self-employment at the time of incapacity we will consider you to be incapacitated once we have assessed your claim as set out in the section headed “Assessing your claim” and are satisfied that you have no capacity for working in your own occupation, on any basis, as a direct result of your injury or illness.’ L&G assessed Mrs M’s original incapacity claim and was satisfied that Mrs M’s injury had resulted in her having no capacity for working in her own occupation. It therefore paid her incapacity benefit for an eight day period after the deferred period ended and Mrs M returned to work on a phased basis. The contract also provides cover for proportionate benefit in certain circumstances. It says: ‘If you return to gainful employment or gainful self-employment on a lower level of earnings than you received immediately before your incapacity, directly as a result of your incapacity, the proportionate monthly benefit will be payable. The Proportionate Benefit will be equivalent to the reduction in your earnings compared to your earnings in the 12 months before incapacity. To be eligible for Proportionate Benefit you must have received monthly benefit due to incapacity before resuming gainful employment or gainful self-employment on reduced earnings.’ There’s no dispute that Mrs M returned to work following her injury on a lower level of earnings. And, as I’ve said, she received limited incapacity benefit for an eight day period. L&G has concluded that Mrs M isn’t entitled to proportionate incapacity benefit because it says that the reason Mrs M wasn’t able to return to full-time work - meaning her earnings reduced - was because she wasn’t able to commute to work. It doesn’t consider this to be a clinical reason for Mrs M’s contract variation. I’ve carefully considered this point. And I’ve taken into account the VCS’ report of 14 January 2025. I accept that during Mrs M’s call with the VCS, Mrs M appears to have suggested that she wanted to return to work, but that she couldn’t drive and public transport wouldn’t be possible. The VCS’ clinical opinion was broadly that Mrs M’s main barrier to work was her inability to commute. In and of itself, I don’t think it was unfair for L&G to conclude this wasn’t a clinical reason for Mrs M’s period of reduced hours and homeworking. However, I’ve also considered the job description provided by both Mrs M and her employer. The employer suggested that Mrs M’s job role was 75% sedentary. But the remaining 25%

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included walking, lifting, showing potential customers around and setting things up. As Mrs M was required to keep her foot elevated because of her injury, it seems that she was prevented from carrying out around a quarter of her insured occupation as a direct result of her incapacity. And the evidence indicates that the arrangement Mrs M reached with her employer was to allow her to carry out many of the sedentary duties she was able to carry out – albeit from home, rather than on-site. Again, this suggests that Mrs M’s incapacity prevented her from carrying out the full duties of her insured role. So it seems to me that Mrs M’s return to work on a lower level of earnings than she was paid immediately before her incapacity was directly caused by her incapacity. In my view then, her claim falls squarely within the proportionate benefit cover set out by the policy. And therefore, I think that it was unfair and unreasonable for L&G to decline to pay Mrs M proportionate benefit for the relevant period. As such, I find that L&G must accept and pay Mrs M’s claim for proportionate benefit from 10 February 2025 onwards, in line with the policy terms and conditions. It must also add interest to each monthly benefit payment at an annual rate of 8% simple from the date each payment was due until the date of settlement. I’ve gone on to consider L&G’s handling of the claim. It’s already accepted that there were delays in its reassessment of Mrs M’s claim and it’s paid her £350 compensation to reflect that. But like the investigator, I don’t think this award goes far enough to reflect the trouble and upset I find L&G caused Mrs M. That’s because L&G’s decision not to pay proportionate benefit caused Mrs M financial inconvenience and distress at a time she was already in pain and worried about her injury. I’m also mindful that Mrs M had existing mental health conditions which the policy paperwork suggests L&G was aware of. So I think the impact of L&G’s decision not to pay proportionate benefit likely had a heightened impact on her. On that basis, I too find that an additional award of £200 compensation is fair, reasonable and proportionate in all of the circumstances. Putting things right I direct L&G to: - Accept and pay Mrs M’s proportionate benefit claim from 10 February 2025, in line with the policy terms and conditions; - Add interest to each monthly benefit payment at an annual rate of 8% simple from the date each payment was due until the date of settlement*; and - Pay Mrs M additional compensation of £200* *If L&G considers that it’s required by HM Revenue & Customs to deduct income tax from that interest, it should tell Mrs M how much it’s taken off. It should also give Mrs M a tax deduction certificate if she asks for one, so she can reclaim the tax from HM Revenue & Customs if appropriate. +L&G must pay the compensation within 28 days of the date on which we tell it Mrs M accepts my final decision. If it pays later than this, it must also pay interest on the compensation from the deadline date for settlement to the date of payment at 8% a year. My final decision For the reasons I’ve given, my final decision is that I uphold this complaint and direct Legal & General Assurance Society Limited to put things right as I’ve outlined above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs M to accept or

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reject my decision before 14 April 2026. Lisa Barham Ombudsman

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