The MIBI says it will not cover Setanta claims

I wrote in May about the problems which have arisen for third parties claiming against Setanta, which is now in liquidation. A strange series of events unfolded which involved the Minister for Finance, who is not responsible for the Motor Insurers’ Bureau of Ireland, stating in the Dáil that the MIBI had “indicated” that they would cover third party Setanta claims.

The Minister gave no detail and did not say who the MIBI had given this indication to. The Irish Brokers Association circulated a briefing paper to its members which, in 6 pages, said effectively the same thing as the Minister for Finance but which appears to have been based on the assurance given by him in the Dáil.

The Minister for Transport, who is responsible for the MIBI, was more cautious and directed queries to that organisation. I wrote to the Minister for Transport for clarity on the situation and he informed me last month that the MIBI was taking legal advice on its liability in this situation. However, it was clear that they did not believe they had a liability. The Minister said:

I understand that the MIBI considers that it has no liability in instances where an alleged offending vehicle was insured at the time of the accident and that it has never previously been involved when a valid policy of insurance was in place.

The MIBI has now obtained the legal advice which supports this position:

the MIBI Agreement (2009) does not require the MIBI to satisfy awards against drivers covered by a policy of insurance where the insurer is unable to pay all or part of an award due to insolvency.

That clarifies the MIBI’s position but it does not mean that the position is correct. Importantly, it leaves third party claimants pursing claims against a liquidator in the eventual hope of being paid in full, which is unlikely, or claiming against the Insurance Compensation Fund, which is subject to a cap of 65% of the value of the claim or €825,000 (whichever is lower). Of course, the MIBI’s position is based on its own opinion and legal advice and it remains to be seen whether any injured party will challenge that position.

In the meantime, three serious questions remain:

  1. What was the Minister for Finance talking about when he told the Dáil in May that the MIBI had indicated it would cover claims against Setanta?
  2. What does section 4.1.1 of the MIBI Agreement mean when it says that if a judgment is obtained for damages that should be covered by insurance but which isn’t paid within 28 days, the MIBI will pay it “whether or not [it is] in fact covered by an approved policy of insurance” and how does this accord with the MIBI’s legal advice? Does it not, along with clause 4.4, envisage paying out on claims such as those brought against an insolvent insurer or one who refuses to pay?
  3. What is the Government going to do to assist third parties who might now lose out on a significant portion of their compensation through no fault of their own and due to events entirely outside of their control?

4 thoughts on “The MIBI says it will not cover Setanta claims

  1. Rossa you have highlighted a serious problem which needs clarification and which probably needs to be legally challanged

  2. MIBI is correct. Why should it cover business failures which lead to valid insurance policies being ‘abandoned?’ Not within its remit to pick up the pieces for commercial failure.

  3. John

    From a policy point of view you may very well be right, but the Setanta liquidation has exposed a gap between the ICF & MIBI schemes which is unfair on injured parties (who are, it is worth remembering, not customers of Setanta and not in any way at fault).

    However, an element of this post is whether or not MIBI is correct from a legal point of view, as opposed to policy point of view. The MIBI agreement is very badly drafted but it does indicate a liability.

  4. I agree. Injured parties are in Limbo- but is the MIBI really a back-up for failed commercial businesses? I have a suspicion that the MIBI agreement was probably very well drafted- from the MIBI point of view – for avoiding such eventualities as this. A legal challenge would require a gambling nature, plenty of disposable stake-money- with winning odds of at least evens.

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