It has been a busy year for the High Court and Court of Appeal with applications and appeals in respect of decisions by the Financial Services and Pensions Ombudsman (“FSPO”). A summary of two recent decisions relating to insurance cover and costs are set out below.
Utmost Paneurope DAC v. The Financial Services and Pensions Ombudsman [2022] IECA 214
The FSPO upheld a complaint made by a policyholder, relating to the payment of benefit under a group income protection scheme. Utmost Paneurope (“Utmost”) had refused cover on the basis that the policyholder’s inability to work stemmed from an excluded illness.
Utmost Paneurope successfully appealed the FSPOs’ decision which was set aside by the High Court. The High Court considered that the FSPO made significant and serious errors in law and should have had regard to the Central Bank’s code of conduct in reaching its decision. The decision touched upon the limits on the scope of the FSPO’s powers,
relating to the statutory remit of the FSPO, the factors to be taken into account when considering complaints and the circumstances in which a court may intervene to set aside the decision of the FSPO.
Concerned by the implications of the decision of the High Court, the FSPO appealed the decision on three broad questions of law, namely: 1) whether the FSPO is required to have regard to the code of conduct published by the Central Bank 2) whether the FSPO has jurisdiction to admit the claim in the absence of a breach of contract 3) whether the High Court has jurisdiction as inferences from documentation than the FSPO.
The Court of Appeal held that the FSPO succeeded in its arguments on the first two questions (and not the third) but failed to overturn the decision of the High Court. On the issue of costs the FSPO argued that its success should mean that Utmost should only recover 50% of its costs.
The Court of Appeal noted that although the FSPO had enjoyed some success in the answers to the questions posed on an abstract level, when applying the facts of the case, the insurer remained successful on the central issue which was setting aside the FSPO decision. The Court of Appeal considered that there was nothing in Utmost’s conduct
to suggest that it should depart from the normal rule that the successful party should be entitled to payment of its costs by the unsuccessful party. It was entitled therefore to recover its legal costs from the FSPO.
This decision is important as it touches on the scope of the FSPO’s powers. The Court of Appeal highlighted that FSPO does not enjoy a carte blanche when considering remedies and that the remedy directed by the FSPO must bear some logical relationship to the conduct which has been found at fault. Furthermore the remedy selected must be proportionate.
Billane v. Financial Services Ombudsman and RSA Insurance Ireland Limited [2022] IEHC 77
The appellants held a policy for home insurance pursuant to which RSA had declined cover for material non-disclosure. The appellants sought to appeal the decision of the FSPO but were unsuccessful before the High Court. The High Court was then required to consider an application for costs. The FSPO upheld RSA's decision. Entitled to its costs by virtue of the statutory legal costs regime and Court rules, as it was successful in its defence.
In considering whether to award costs to RSA it was noted that the High Court, in its principal judgment, had criticised the complex process of purchasing a relatively simple insurance product which required an abundance of documentation and was not surprised that it would lead to a dispute. It also noted that there had been difficulty in
obtaining discovery from RSA and that RSA’s participation in proceedings did not add anything to the process. Due to all of the above it was ordered that the appellants were not liable to pay RSA’s costs.
The Court highlighted by way of obiter that s.8 of the Consumer Insurance Contracts Act 2019 (duty of disclosure) did not apply in this instance but it was hoped that insurers would bear this in mind when drafting consumer insurance documentation in future and that this would be enforced scrupulously by the Courts (as it was not in force when the policy was entered into).
The decision highlights that insurers may not recover their legal costs relating to FSPO disputes even if they actively participate in proceedings. The comments made in obiter also highlight the importance of adhering to the relatively new rules imposed by the Consumer Insurance Act 2019.
