Saturday 20 January 2018

State to foot Setanta bills but payouts likely to drop

Michael Noonan Picture: Damien Eagers
Michael Noonan Picture: Damien Eagers
Charlie Weston

Charlie Weston

One of the price pressures on motor premiums has eased after insurers won a Supreme Court case on how claims associated with bust Setanta Insurance are to be funded.

But people with Setanta-related claims may get lower levels of compensation, with lawyers' fees also likely to be hit.

Malta-regulated Setanta collapsed three years ago, with claims of €95m. The bust company only has funds to pay a third of this, according to its liquidator.

The Supreme Court sided with the Motor Insurers' Bureau of Ireland (MIBI), which is funded by insurers.

The judges said it is not liable for claims brought against Setanta. The court's five-to-two majority decision means successful claims against Setanta will have to be met from the State's Insurance Compensation Fund.

The liquidator of Malta-registered Setanta, which sold insurance exclusively in Ireland before it collapsed in 2014, says there are 1,750 claims that have yet to be paid out.

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In his judgment finding in favour of MIBI, Mr Justice Donal O'Donnell noted claimants could recover 100pc from the MIBI.

Only 65pc of the value of a claim is met when the Insurance Compensation Fund is used.

The MIBI appeal was against a Court of Appeal 2016 judgment.

That court had rejected the MIBI's arguments it should not be held liable.

Insurers had argued that an earlier Court of Appeal ruling affected all insurance companies underwriting motor insurance here. They claimed they had to make financial provision for any future collapses, as they fund the MIBI.

The MIBI argued the appeal court decision "left it captive", with its members obliged to give guarantees even concerning insurers that they believed would 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 insurers to deal with claims related to uninsured drivers.

Finance Minister Michael Noonan said legislation is due to be brought forward by the Government soon to reform how the Insurance Compensation Fund works.

It will also ensure that in future the Insurance Compensation Fund pays out 100pc of third-party motor claims.

Insurance Ireland, the representative body for the industry, welcomed the Supreme Court decision. It said the Motor Insurers' Bureau was never designed to address the liabilities of an insolvent insurer.

Irish Independent

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