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High Court insurance ruling offers ‘helpful clarity’

Lawyers at A&L Goodbody (ALG) have described as “significant” a recent High Court judgment that centred on the treatment of insurance contracts in a winding-up.

The decision concerned CBL Insurance Europe Designated Activity Company (CBL), a non-life insurance business that was wound up in March 2020, when the Central Bank also withdrew the firm’s insurance authorisation.

The liquidators, using powers under the Companies Act 2014, then applied to the High Court to determine several questions relating to the treatment of insurance claims in the liquidation of CBL.

Complex issues

In a note on the ALG website, the firm’s lawyers say that the judgment dealt with complex issues that included the admissibility of claims made after the winding-up order, and the prioritisation of certain insurance claims.

One of the High Court’s decisions was that CBL’s insurance contracts terminated when the court ordered that CBL be wound up on 12 March 2020.

It based this determination on the provisions of the European Union (Insurance and Reinsurance) Regulations 2015, also known as the Solvency II Regulations.

The liquidators also asked the court about how they should treat claims made under policies linked to events that occurred before the wind-up date, or events that might occur after that date.

Unearned premium

The ALG lawyers note that the court determined that CBL incurred a contingent liability to pay the insured when it entered an insurance contract.

Accordingly, any claim made under a policy of insurance should be admitted to proof in the winding up – including a claim where the insured event occurred after the relevant date.

The court also decided that a claim for a return of unearned premium – part of the premium related to the unexpired period of the policy – was an ‘insurance claim’ under the relevant regulations.

“The judgment provides some helpful clarity for insurance providers, policyholders, and practitioners alike, particularly regarding the impact on policyholders where a liquidator is appointed to an insolvent insurer,” the ALG lawyers state.