merrion street

The Supreme Court has today made a decision in the case of Law Society of Ireland v Motor Insurers' Bureau of Ireland (MIBI). The Court found that the Insurance Compensation Fund is liable for claims of policyholders in cases where a motor insurance company has become insolvent.
The context to this case is that when Setanta insurance collapsed it was anticipated that the Insurance Compensation Fund (ICF) would compensate up to 65% of policyholders’ losses and that the balance might be recovered from the liquidation process in accordance with the rights of policyholders as unsecured creditors of the business.
Subsequently, the Law Society took a case arguing that the Motor Insurance Board of Ireland (MIBI) should be liable for compensation rather than the ICF. This would have had the effect that policyholders would have been covered for up to 100% compensation rather than the 65% which would apply were the ICF to be liable. While 100% compensation was desirable for Setanta policy holders there was legal uncertainty at the time. In the event the case was won by the Law Society and this decision was upheld by the High Court. However, this morning’s decision has now overturned those earlier decisions.
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 judgment 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.