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Insurance Ruling

Supreme Court rules State must make payouts to claimants affected by collapse of Setanta Insurance

The State Liquidator and Insurance Compensation Fund (ICF) is now to be held liable for the outstanding Setanta payouts.

shutterstock_454155112 Shutterstock / PongMoji Shutterstock / PongMoji / PongMoji

THE SUPREME COURT has ruled that the Irish State must be held liable for outstanding insurance claims in the aftermath of the collapse of Setanta Insurance.

Maltese-based insurer Setanta was wound up in April 2014. In the aftermath it was announced that those insured who had been struck by uninsured drivers would not be covered in the aftermath of the collapse.

Over 1,600 claimants have yet to be compensated following the collapse of Setanta, with the winding-up of the firm one of the major reasons cited regarding the inexorable rise of Irish premiums in recent times.

Today’s judgement was arrived at via a 5:2 decision by the seven Supreme Court justices and sees a prior ruling secured by the Law Society of Ireland overturned.

The key ruling in the judgement came from Justice Donal O’Donnell, who questioned the “Victorian certainty” of the decision previously arrived at by the High Court. That judgement can be read here.

The previous decision had ruled that the Motor Insurers’ Bureau of Ireland (MIBI) was to be held liable for the outstanding claims. Now that that ruling has been overturned, the compensation paid will instead come from the State’s Insurance Compensation Fund (ICF), which will account for 65% of the payouts outstanding, the remainder to be paid by the State Liquidator.

‘Payout restrictions must be lifted’

The Department of Finance has responded to the decision saying:

“The position now is that we have clarity in respect to payments that are to be made to Setanta policyholders. Based on today’s decision the Insurance Compensation Fund will now commence the process of making payments of up to 65% to affected policyholders. It is likely that in respect of third party claimants, a significant proportion of the balance of a claim will be met from the proceeds of the distribution of Setanta’s assets on completion of the liquidation process.”

Arising from the Supreme Court decision the Department of Finance is moving speedily to bring certainty to the structure of the compensation framework in the future, particularly in the event of a liquidation of an insurer that is providing motor insurance in Ireland. Draft Heads of a Bill for amendments to the relevant Insurance Acts are expected to be brought to Government by the Minister for Finance shortly. This legislation will reflect the judgement of the Supreme Court today and the recently published Department of Finance report on the reform of the Insurance Compensation Fund which will ensure 100% of third party motor claims will be covered in future.

Reacting to the Supreme Court ruling, Sinn Féin’s Pearse Doherty said that the 65% restriction regarding compensation from the ICF should be waived in this case, while calling for a drop in premiums:

“Those restrictions should be removed for Setanta customers who have had to wait so long,” he said.

I note the insurance industry has been using the uncertainty of the Setanta case as an excuse to justify premium increases and as an explanation as to why new entrants are not entering the market. I will be expecting to see a drop in premiums on the basis that that uncertainty should now be ended with the insurers’ case winning out.

Fianna Fáil’s finance spokesperson Michael McGrath likewise called for the ICF’s ceiling of €825,000 to be lifted.

“This cannot be allowed to stay as is,” he said.

Claimants must not be left to foot the bill. As I have said previously, the Government must ensure fairness is applied, and if this requires both policy and legislative change, then so be it.

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