Setanta Insurance – the end of the road?

The Supreme Court in Ireland has found in favour of the Motor Insurers’ Bureau of Ireland (MIBI) in the long running litigation to determine who should clean up the mess left by the collapse of Setanta Insurance.  This decision means that the state and taxpayers will have to foot the bill for compensating those with claims pending against Setanta insurance.

Setanta Insurance collapsed in April 2014 leaving potential claimants together with Setanta policyholders in limbo.  Claimants were unsure whether they would ultimately be compensated by the Insurance Compensation Fund or the MIBI. An application to the Court was made by the Accountant of the Courts of Justice who has statutory responsibility for administering the Insurance Compensation Fund to determine the matter. The Court then directed that the Law Society of Ireland should act as claimant and the MIBI as respondent in the proceedings.

In September 2015, the High Court found the MIBI liable for the outstanding Setanta claims, however the Motor Insurers’ Bureau appealed the decision to the Court of Appeal and in March 2016, they were again found liable for the outstanding Setanta claims.

The MIBI appealed that decision to the Supreme Court and in May 2017 the Supreme Court made a ruling in favour of the MIBI which is bad news for former Setanta policyholders and those with claims outstanding against Setanta policyholders.

It is unlikely that Setanta policyholders will receive any redress in respect of outstanding premiums as Setanta has previously indicated that it could probably only meet around 30% of its debts. Unfortunately policyholders owed a refund of their premiums are unlikely to be at the top of the queue when those assets are finally distributed.

The decision means that those with claims pending against Setanta policyholders will have successful claims paid from the compensation fund. The bad news is that the compensation fund is only required to discharge 65% of sum awarded with payouts capped at €825,000. The MIBI would have paid 100% of the claim. There have been calls for this ceiling to be scrapped and the matter is being considered by the Dáil so time will tell if claimants will be compensated in full or not.

Furthermore, despite the court decision, it is likely that claimants will face further delay as the process to be adopted for dealing with these claims has to been finalised by the administrators of the compensation fund. Originally it was thought that a Court order would be required in all cases, and as Setanta was not in a position to provide instructions to their defence solicitors, it was anticipated that every outstanding case would have to be tried in full in court with no possibility for settlements outside of court even in the simplest cases. This is a highly inefficient and expensive method of determining these claims and a more streamlined approach should be found to ensure that straightforward, assessment cases do not have to be heard in Court. It is believed that there are around 1,700 cases pending. All of the courts have been adjourning cases involving Setanta pending the outcome of the Supreme Court case therefore there is likely to be a backlog to obtain a hearing date which will also have a knock-on effect on other court business.

The ruling was met with disappointment for many with the notable exception of the insurance industry itself. It is thought that the outstanding claims are worth up to €95 million. The MIBI is funded by the insurance industry and understandably there were significant concerns about the effect that asking the MIBI to underwrite an insolvent insurer’s losses would have upon the industry. It will be interesting to see if the decision results in reduced premiums as insurers have been using the potential liability as part-justification for the substantial premium increases faced by Irish drivers of late.