Who was Setanta and what went wrong?
Setanta Insurance was a company set up in Malta that traded in Ireland selling exclusively car insurance. It would appear that it ran into some trouble in 2013 and by 16 April 2014, it could no longer trade and went into liquidation. This was unprecedented in Ireland in the sense that it was the first liquidation of an insurer limited to car insurance.
There is little doubt that the regulators took their collective eyes off the ball.
So who was liable for the outstanding claims?
This is where the problem lies. The Law Society immediately identified the Motor Insurers Bureau of Ireland (MIBI) as the appropriate entity and advised its members accordingly. Indeed, the Minister for Finance initially told the Dail that he agreed with this before withdrawing this comment some time later, following legal advice.
The “unequivocal” legal advice received by the MIBI stated that the Insurance Compensation Fund (ICF) should pick up the tab and that the MIBI had no liability.
The Law Society obtained its own legal advice which confirmed that the position was anything but unequivocal and that a strong case could be made that the MIBI would be liable. It subsequently engaged in considerable correspondence with the MIBI and the Department of Transport in efforts to see their legal advice, or at least identify its author, and to attempt to mediate what had become an impasse.
All such efforts were stonewalled and a position of implacability built up which is still in place over a year later.
What is the difference between the MIBI and the ICF?
The essential difference is 35% of the damages. If the MIBI are liable, then they must pay all damages. If not, then the ICF will discharge the liabilities but only up to 65% of the claim to a ceiling of €825,000. The remaining 35% would have to be sought directly from the policyholder or from whatever sums, if any, remained when the liquidation is complete several years from now. All legal costs should be payable in either scenario.
How did the dispute come to be litigated?
The President of the High Court is the controller of the ICF which is administered by the Accountant of the Courts of Justice. The ICF may only pay out where it is the fund of last resort. Given the uncertainty with the MIBI position, the Accountant, at the behest of the President, brought an application to the High Court seeking clarity on the role of the MIBI and the ICF in relation to claims against Setanta policyholders. The Law Society agreed to prosecute this action.
What was the result?
The case commenced last April and was heard in the High Court in July 2015. The decision of Mr Justice Hedigan was delivered on 4 September 2015 and emphatically debunked all of the MIBI arguments. It essentially confirmed that Clause 4.1.1. of the 2009 MIBI agreement meant what it appeared to mean, that where any judgment for damages, arising from a road traffic accident, remains unsatisfied for a period of 28 days, the MIBI must discharge it. The MIBI argued that this did not apply to insolvency whereas the Law Society produced considerable evidence that it did.
What happened in the Court of Appeal?
The MIBI appealed and the hearing was expedited by the judiciary who recognised the urgency of the situation. The appeal was heard in January 2016 by President Ryan, Ms Justice Finlay Geoghegan and Mr Justice Hogan who gave judgment on 2 March and unanimously affirmed the order of the High Court and held that the MIBI’s liability under the 2009 Agreement extended to situations of insurer insolvency. Therefore, the MIBI has a potential liability for claims against Setanta policyholders subject to proof of liability in each individual case.
So what does this mean?
It is clear that where liability of the MIBI can be proven, it now must pay all claims. However, the extent of such liability is still somewhat nebulous. There are many cases in which judgment has been obtained and the MIBI is not a party to the proceedings as its involvement could not have been anticipated. The Court of Appeal has made reference to the difficulty that some claimants would have had in complying with conditions precedent in the 2009 Agreement and this obiter dicta is likely to be of importance.
And what of Setanta policyholders?
In the Court of Appeal, the judges made reference to what would be unfairness if anyone who, acting appropriately by obtaining insurance, was subsequently punished by the MIBI seeking recompense under the 2009 Agreement but, while this is undoubtedly persuasive, it is not binding given that it was not germane to the decision made.
Is this the end at last?
Sadly, it would appear not. The MIBI have publicly indicated an intention to make a further appeal to the Supreme Court and in order to succeed in having the matter heard, it will need to persuade the Supreme Court that it is a matter of general public importance or in the interests of justice.
So, it would appear that the wait goes on for the 1700 claimants who have still received no compensation.