An appeal by the Motor Insurers Bureau of Ireland (MIBI) against a High Court ruling that it must pay out on outstanding claims following the collapse of the Setanta Insurance Company two years ago has opened before the Court of Appeal.
The MIBI is appealing Mr Justice John Hedigan’s finding that it was liable to pay out in respect of claims against persons who were insured with Setanta at the time of its liquidation.
The case has important implications for motor insurance premiums as well as parties involved in claims concerning Setanta.
After Setanta’s liquidation, approximately 1,750 claims by and against Setanta policyholders remain.
Opening the appeal, Paul Gallagher, counsel for the MIBI, said the case raised “a very important issue” concerning the liabilities arising from the insolvency of one of its members.
The High Court ruling he said has created “very significant difficulties” for the MIBI and its members, as it meant they were now caught up in the insolvency of a fellow member of the MIBI.
Counsel told the three- judge appeal court an effect of the judgement is the members of the MIBI, made up of the 40-plus insurance companies operating in the state, are now “co-guarantors” of rival firms over which they have no entitlement to information about prior to insolvency.
Counsel said the MIBI Agreement does not deal with an issue as fundamental as the issue of insolvency of one of its members.
He said the High Court had decided a phrase in one particular sub-clause in the agreement meant the MIBI has a liability to pay out in respect of claims against persons who are insured by an insurer which has become insolvent.
Counsel said this interpretation by the High Court was “too narrow” in the context of the entire MIBI agreement.
The court’s reliance on this “hidden” sub-clause rendered the judgement incorrect, and on this basis the decision should be set aside, counsel added.
Another effect of the High Court’s decision, he said, is that the MIBI could come after and seek judgment against any Setanta policy holder found liable as a result of a claim the MIBI had to pay out on.
The appeal is opposed by the Law Society, the body that regulates solicitors.
Following Setanta’s collapse, the society wrote to the MIBI stating solicitors had been inundated with queries from concerned Setanta customers as to the consequences of the liquidation.
Initially the proceedings had been brought by the Accountant of the Courts of Justice who has statutory responsibility for administering the Insurance Compensation Fund.
The High Court subsequently directed that the Law Society of Ireland should act as the claimant while the MIBI should be the respondent.
The Accountant of the Courts of Justice had adopted a neutral position in the proceedings.
In April 2014, Setanta, a Maltese registered company, opted to surrender its insurance business licence and a liquidator was appointed.
Those policies were cancelled by the liquidator in May 29, 2014.
Setanta was a member of the MIBI, and had issued some 75,000 motor insurance policies.
Some 1,750 claims existed by and against Setanta policy holders when it was wound up.
The MIBI argued it did not have to satisfy awards against policy holders where the insurer was unable to pay all or part of the award because of insolvency.
The Department of Transport shared the MIBI’s view and the Minister for Transport suggested policyholders should pursue claims with the liquidator of Setanta.
In his ruling, Mr Justice Hedigan said the wording of the 2009 MIBI Agreement meant it had a liability to pay out in respect of claims against persons who had been insured by an insurer which had become insolvent.
The appeal before the President of the Court of Appeal Mr Justice Sean Ryan, Ms Justice Mary Finlay Geoghegan, and Mr Justice Gerard Hogan continues.
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