The background to this case is that when Setanta Insurance Company Limited (In Liquidation) ("Setanta"), a Maltese registered insurer, collapsed it was initially thought that the ICF would be liable to 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 Setanta.
On foot of a court order, the Law Society of Ireland (the "Law Society") took a case arguing that the Motor Insurer's Bureau of Ireland (the ''MIBI'') should be liable to pay the compensation for policyholders' losses in this case. The case was in essence aimed at preventing the Accountant of the High Court making payments on behalf of the ICF on the basis it appeared the MIBI could instead pay out.
The effect of the MIBI being found liable would be that the policyholders would have been covered for up to 100% compensation rather than the 65% or €825,000 (whichever is less) cap on coverage that would apply were ICF found to be liable.
The MIBI argued that the ICF should be liable for the compensation in this case, as it was in the Quinn Insurance and PMPA cases, which both involved insurers becoming insolvent leaving policyholders with losses and unpaid claims. The Law Society won the case in the High Court and it was upheld on appeal to the Court of Appeal that the MIBI should pay the compensation. However, the Supreme Court has reversed the ruling of the High Court.
The MIBI Agreements
The Agreements between the Minister for Transport and the MIBI between 1955 and 2009 (the ''MIBI Agreements'') were introduced to address the issues arising in the case of uninsured or untraceable drivers. The central issue for the Supreme Court to consider was whether the MIBI Agreements extend to cover liability for claims against drivers whose insurer has become insolvent. While the Supreme Court noted the MIBI Agreements contain a number of ambiguities, ultimately, it did not accept that they were intended to extend in such a manner.
Compensation Framework Reform
As a result of this decision, the Department of Finance is moving to bring more certainty to the structure of the compensation framework for the future, particularly in situations where a motor insurer becomes insolvent.
This reform will come in the form of the Insurance (Amendment) Bill 2017, of which the Heads of Bill were recently published. This Bill proposes to address the proposals made in the Review of the Framework for Motor Insurance Compensation in Ireland Report which was endorsed by the Government last year, along with the weaknesses highlighted by the failure of Setanta.
Proposed amendments to be introduced by the Bill include:
- Increasing the level of ICF coverage for all future third party motor claims from 65% to 100% for personal injuries and €1,225,000 per claim for property;
- Introducing a requirement that the increased coverage of the ICF be funded by a contribution from the motor insurance industry (to cover the 35% increase in ICF coverage);
- Providing a legal basis for Irish motor insurers to contribute an amount equivalent to 2% of the gross written motor premiums to an ex-ante fund to be held by the MIBI to enable the industry meet the 'extra 35%' commitment should a motor insurer be liquidated in the future; and
- To facilitate the transfer of the ICF's administration from the Accountant of the Courts of Justice to the Central Bank of Ireland.