Thursday 20 July 2017

MIBI wins Supreme Court appeal over liability for collapsed insurer Setanta claims

The High Court, Dublin
The High Court, Dublin

Aodhan O'Faolain

The Motor Insurers’ Bureau of Ireland has won its Supreme Court appeal over decision it is potentially liable for claims brought against collapsed insurer Setanta.

The court’s 5/2 majority decision, given in four separate judgments, means successful claims against Setanta will have to be met from the State’s Insurance Compensation Fund.

The liquidator of Maltese-registered Setanta, which sold insurance policies exclusively in Ireland before it collapsed in 2014, has determined the cost of claims could run to about €90m with the number of claimants estimated at 1,750.

In his judgment finding in favour of the MIBI, Mr Justice Donal O’Donnell noted claimants could recover 100pc from the MIBI as opposed to 65pc if claims were met from the Insurance Compensation Fund.

The MIBI appeal was against a Court of Appeal 2016 judgment which rejected the MIBI’s arguments it should not be held liable. The COA ruling affected all insurance companies underwriting motor insurance here.

The MIBI argued, as a result of the appeal court decision, it has been “left captive” with its members obliged to give guarantees even concerning insurers whom they believe will not last. It maintained the Insurance Compensation Fund should pick up the Setanta bill, as was done in the cases of PMPA and Quinn Insurance. 

In opposing the appeal, the Law Society argued that agreements between the MIBI and government concerning claims related to uninsured drivers envisaged the MIBI would pay out if a member became insolvent.

The MIBI is operated under the terms of a 2009 agreement between the Government and companies underwriting motor insurance in Ireland to deal with claims related to uninsured drivers.

The core issue in the appeal was the interpretation of that agreement.

Commenting on today's decision, Minister for Finance Michael Noonan said that the outcome meant that there was now clarity in respect to payments which are being made to Setanta policyholders.

He went to say that the Department of Finance was moving speedily to bring certainty to the structure of the compensation framework in the future, in particular in the event of a liquidation of an insurer that is providing motor insurance in Ireland.

Minister Noonan also said that he was expecting to bring draft Heads of a Bill for amendments to the relevant Insurance Acts to Government shorty.

"This legislation will reflect the judgment of the Supreme Court today and the recently published Department of Finance report on the reform of the Insurance Compensation Fund which will ensure 100pc of third party motor claims will be covered in future," Minister Noonan said.

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