Hiscox S.A. v The Financial Services and Pensions Ombudsman

• Jurisdiction: Ireland
• Judge: Mr. Justice Paul Burns
• Judgment Date: 06 October 2022
• Neutral Citation: [2022] IEHC 557
• Court: High Court
• Docket Number: [2021 No. 128 M.C.A.]

Between

Hiscox S.A.

Appellant

and

The Financial Services and Pensions Ombudsman

Respondent

and

NMME Zone Limited T/A The Zone

Notice Party

[2022] IEHC 557

[2021 No. 128 M.C.A.]

THE HIGH COURT

Insurance – Unreasonable conduct – Financial Services and Pensions Ombudsman Act 2017 s. 64 – Appellant bringing a statutory appeal against a decision of the respondent upholding a complaint by the notice party against the appellant – Whether the appellant had established any serious or significant error or any series of such errors on the part of the respondent

Facts: The appellant, Hiscox S.A. (the provider), brought a statutory appeal pursuant to s. 64 of the Financial Services and Pensions Ombudsman Act 2017 against a decision of the respondent, the Financial Services and Pensions Ombudsman (the FSPO), dated 5th May, 2021 in which the FSPO upheld a complaint by the notice party, Nmme Zone Ltd (the complainant company), against the provider regarding insurance policy number 8031657. By way of originating notice of motion dated 8th June, 2021, the provider sought an order setting aside the decision of the FSPO and/or the directions contained therein, as well as further alternative reliefs. The provider challenged the FSPO decision as regards upholding the complaint on the grounds set out at s. 60(2)(b) and (g) of the 2017 Act. A grounding affidavit was sworn by Mr Corcoran, claims manager, which set out, inter alia, a number of alleged serious and significant errors in the decision of the FSPO, both as regards the grounds on which the complaint was upheld and in relation to the directions to pay policy benefits in advance and to pay the sum of €5,000 compensation. The essence of the provider’s appeal was that in initially declining cover, it was acting on foot of an interpretation of the policy provisions which it genuinely believed was the proper interpretation to be applied, and which it believed was supported by the prevailing jurisprudence at the time. It was submitted that, in such circumstances, the provider was acting bona fide in declining cover and that thereafter it participated fully in the FSPO complaint process. The provider submitted that following the judgment of the UK Supreme Court in The Financial Conduct Authority v Arch Insurance (UK) Limited & Ors [2021] UKSC 1, it immediately carried out a review of relevant policies and expeditiously confirmed that cover would in fact be provided subject to the policy terms and conditions in relation to assessment of the level of same. It was submitted that, in such circumstances, the decision of the FSPO was seriously and significantly in error in holding the provider’s conduct to have been unreasonable and unjust within the meaning of s. 60(2)(b) of the 2017 Act and otherwise improper within the meaning of s. 60(2)(g). It was further submitted that no adequate reasons were set out in the decision to support such conclusions. In relation to the remedies ordered, it was submitted that same were not supported by the reasoning in the judgment and/or were not permitted as a matter of law.

Held by the High Court (Burns J) that, taking the adjudicative process and the decision as a whole, he was not satisfied that the provider had established any serious or significant error or any series of such errors on the part of the FSPO in finding the conduct of the provider to have been unreasonable, unjust and otherwise improper, or in giving the remedial directions given in respect of same. Burns J dismissed the provider’s appeal.

Burns J held that this was a matter in which the costs should follow the event, and unless either party indicated that it wished to make a submission to the contrary within ten days of receipt of the judgment, then the final order would include provision that the costs of the proceedings be awarded to the FSPO against the provider.

Appeal dismissed.

JUDGMENT of Mr. Justice Paul Burns delivered on the 6th day of October, 2022

1 . This matter comes before the Court by way of a statutory appeal pursuant to s. 64 of the Financial Services and Pensions Ombudsman Act, 2017 (hereinafter referred to as “the Act of 2017”), brought by the appellant (hereinafter referred to as “the provider”) against a Decision of the respondent (hereinafter referred to as “the FSPO”) dated 5th May, 2021 in which the FSPO upheld a complaint by the notice party (hereinafter referred to as “the complainant company”) against the provider regarding insurance policy number 8031657. The decision was actually that of a Deputy Financial Services and Pensions Ombudsman but nothing turns on this.

Background

2 . At all material times, the complainant company was the operator of a children's play/activity centre known as “The Zone”. Following the outbreak of the Covid-19 pandemic in early 2020, the complainant company received a communication from its industry group, Play Activity and Leisure Ireland, stating that, following advice from the Department of Health, the Department of Business and the then Minister of State for Housing and Urban Development, it was recommending that centres close. Particular reference was made to a stipulation from the Department of Health that children of school age do not mix in any social setting. On foot of the recommendation, the complainant company temporarily closed its business on 15th March, 2020.

3 . The complainant company had taken out a policy of insurance with the provider which was in force at the time of the temporary closure. The said policy of insurance provided cover for losses occurring in certain circumstances and, in particular, included a “Property — Business interruption (Office)” cover which stated as follows:-

“What is covered – We will insure you for your financial losses and any other items specified in the schedule, resulting solely and directly from an interruption to your business caused by:

Financial losses from insured damage …

Public authority

5. Your inability to use the office due to restrictions imposed by a public authority during the period of insurance following:

• (a) a murder or suicide;

• (b) an occurrence of a notifiable human disease;

• (c) injury or illness of any person traceable to food or drink consumed on the premises;

• (d) defects in the drains or other sanitary arrangements;

• (e) vermin or pests at the premises.”

4 . On 19th March, 2020, the complainant company's insurance brokers notified the provider of a claim for business interruption losses arising from the temporary closure of the complainant company's business. On 25th March, 2020, following its assessment, the provider declined the complainant company's claim by way of email to the complainant company's broker. The complainant company submitted a complaint to the provider by email on 2nd April, 2020 regarding its decision to decline indemnity. The provider emailed the complainant company's broker on 26th May, 2020 and the complainant company itself on 2nd June 2020, to advise that following the completion of its internal review process, it was standing over its decision to decline the claim.

5 . The main reasons given for the declinature were the interpretations placed on certain clauses in the policy by the provider so that cover was not triggered, such as:-

The provider emphasised that “there is no ambiguity in the Policy wording”.

• (i) That the loss had to be caused solely and directly from the insured peril and not caused in part by a slowdown in economic activity as a result of the pandemic;

• (ii) That restrictions or closure had to be imposed specifically on the policy holder's premises; and

• (iii) That the premises had closed without an instruction from the HSE to do so.

Complaint to FSPO and Outcome Of Same

6 . The complainant company made a complaint to the FSPO.

7 . Section 60(2) of the Act of 2017 provides as follows:-

“60.(2) A complaint may be found to be upheld, substantially upheld or partially upheld only on one or more of the following grounds:

• (a) the conduct complained of was contrary to law;

• (b) the conduct complained of was unreasonable, unjust, oppressive or improperly discriminatory in its application to the complainant;

• (c) although the conduct complained of was in accordance with a law or an established practice or regulatory standard, the law, practice or standard is, or may be, unreasonable, unjust, oppressive or improperly discriminatory in its application to the complainant;

• (d) the conduct complained of was based wholly or partly on an improper motive, an irrelevant ground or an irrelevant consideration;

• (e) the conduct complained of was wholly or partly on a mistake of law or fact;

• (f) an explanation for the conduct complained of was not given when it should have been given;

• (g) the conduct complained of was otherwise improper.”

8 . In the course of dealing with the complaint, the FSPO received a substantial amount of documentation relating to the matter as well as several sets of submissions from the complainant company and the provider. In addition to other materials, the complainant company relied upon an instruction from the Central Bank to insurers dated 27th March, 2020 headed: “Central Bank of Ireland Expectations of Insurance Undertakings in Light of COVID–19”. This stated inter alia:-

“Although the Central Bank expects that most policy wordings are clear in terms of what cover is provided and what cover exclusions are in place, where there is a doubt about the meaning of a term, the interpretation most favourable to their customer should prevail. Firms must ensure that claims are appropriately assessed and where there is insurance cover in place that claims are accepted and paid promptly.

In this context, the Central Bank is of the view that where a claim can be made because a business has closed, as a result of a Government direction due to contagious or...