Setanta Insurance customers left without cover after the firm’s collapse are now likely to be personally liable for at least part of any outstanding claims against them.
Former policyholders had hoped that a combination of contributions from the Insurance Compensation Fund and the sale of Setanta assets would raise enough money to cover the full cost of the more than 2,000 claims outstanding when the company folded earlier this year.
But the compensation fund is restricted to paying out 65% of any claim or €825,000, whichever is the smaller amount, and the Central Bank has warned that proceeds from the firm’s liquidation may not make up the remainder.
That means policyholders could have to personally pay part of any settlement or award made against them. It also means that if policyholders can’t pay, victims of accidents and other claimants may not receive their compensation.
A Central Bank letter to Fianna Fáil finance spokesman Michael McGrath revealed: “Current estimates would lead the liquidator to believe that the proceeds of the liquidation will fall short of the 35% not covered by the fund.”
Bernard Sheridan, the Central Bank’s director of consumer protection, wrote: “The liquidator is also highlighting to policyholders the unfortunate fact that policyholders could be liable for any amount due on an established claim.
“For example, there is a potential risk that any claimant could decide to advance their claim before the position on funding is clear and legally they are entitled to recover the full amount of any award or judgment from the named respondent, who is the policyholder.
“There is also of course the prospect that the proceeds from liquidation and payment from the [compensation] fund do not cover the full amount of the claim.”
The letter warns the liquidation could take time and advises policyholders to seek their own legal advice.
Michael McGrath said many Setanta policyholders and innocent victims were facing large losses and he said the Government should urgently establish an expert group to find solutions for them.
“It is not acceptable that former Setanta policyholders who paid over their premium in good faith could now be held personally liable for an outstanding claim against their policy,” he said.
Malta-registered Setanta Insurance went into liquidation in April this year, leaving around 75,000 policyholders in limbo, many of them small firms owners and van drivers as it specialised in the commercial vehicle market.
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