Murphy v Financial Services Ombudsman and Another

• Jurisdiction: Ireland
• Judge: Mr Justice Michael Peart
• Judgment Date: 21 February 2012
• Neutral Citation: [2012] IEHC 92
• Court: High Court
• Date: 21 February 2012

Murphy v Financial Services Ombudsman & Allianz PLC

IN THE MATTER OF AN APPEAL PURSUANT TO PART VIIB OF THE CENTRAL BANK ACT 1942, AND CHAPTER 6 AND SECTION 57CL THEREOF (AS AMENDED AND INSERTED BY THE CENTRAL BANK AND FINANCIAL SERVICES AUTHORITY OF IRELAND ACT, 2004)

Between:

Oliver Murphy

Applicant

And

Financial Services Ombudsman

Respondent

And

Allianz Plc.

Notice Party

[2012] IEHC 92

Record Number: No. 161 MCA./2011

THE HIGH COURT

BANKING LAW

Financial services ombudsman

Appeal - Insurance policy - Notice party repudiating liability for alleged failure by applicant to disclose material facts - Dispute regarding operability of alarm system - Neither party requesting oral hearing from respondent - Respondent finding for notice party - Whether analysis carried out of competing arguments of parties - Whether oral hearing necessary - Lyons v Financial Services Ombudsman [2011] IEHC 454 (Unrep, Hogan J, 14/12/2011) followed - Hyde v Financial Services Ombudsman [2011] IEHC 422 (Unrep, Cross J, 16/11/2011) considered - Central Bank Act 1942 (No 22), s 57CM - Appeal allowed, matter remitted (2011/161MCA - Peart J - 21/2/2012) [2012] IEHC 92

Murphy v Financial Services Ombudsman

Facts: The applicant had suffered a burglary and was in a dispute with his insurers. The applicant sought to have the respondent investigate the claim. He had engaged himself an electrician to state an opinion on the state of the alarm system. The applicant submitted that the respondent should have exercised his power to direct an oral hearing and sought to set aside the decision of the respondent. The applicant complained inter alia that the findings of the respondent were vitiated by serious and significant error and that the oral hearing would have resolved the conflict of professional opinion. The Court considered the provisions of s. 57CM Central Bank and Financial Services Authority of Ireland Act 2004.

Held by Peart J. that the Court would make an order setting aside the finding of the Ombudsman and remitting the proceedings to the Ombudsman. Fair procedures required that the applicant be afforded an opportunity to hear details of the report and have an opportunity to cross-examine it.

CENTRAL BANK ACT 1942 S57CM

CENTRAL BANK ACT 1942 S57CM(2)

CENTRAL BANK ACT 1942 S57BK(4)

CENTRAL BANK ACT 1942 S57BB(C)

LYONS & MURRAY v FINANCIAL SERVICES OMBUDSMAN UNREP HOGAN 14.12.2011 2011/31/8710 2011 IEHC 454

KOCZAN v FINANCIAL SERVICES OMBUDSMAN UNREP HOGAN 1.11.2010 2010/26/6385 2010 IEHC 407

HYDE v FINANCIAL SERVICES OMBUDSMAN UNREP CROSS 16.11.2011 2011/26/6887 2011 IEHC 422

CAGNEY v FINANCIAL SERVICES OMBUDSMAN UNREP HEDIGAN 25.2.2011 (EX TEMPORE)

CAFFREY v FINANCIAL SERVICES OMBUDSMAN UNREP HEDIGAN 12.7.2011 2011/7/1582 2011 IEHC 285

CENTRAL BANK ACT 1942 S57CM(2)(B)

CENTRAL BANK ACT 1942 S57CM(2)(C)

CENTRAL BANK ACT 1942 S57CM(3)

1 On the 1 ^st August 2009 the applicant suffered a burglary and fire at his bed and breakfast premises in Dundalk, Co. Louth. A policy of insurance with the Notice Party ("Allianz") was in existence in respect of the premises, and the applicant sought to recover the amount of his losses under that policy which run to a sum of approximately €200,000. It is clearly a very significant loss for the applicant. He made a claim but appears to have received little by way of response. His solicitors communicated with Allianz also but by 29 ^th March 2010 were still calling for progress to be made and complaining about the delay in having the claim dealt with.

2 The applicant completed a complaint form on the 7 ^th April 2010 and submitted it to the Ombudsman. At that point his complaint was delay and he wanted the Ombudsman to assist in getting the claim settled. Having submitted it, the Respondent replied by letter dated 8 ^th April 2010 stating that the applicant should firstly go through the internal complaints procedure at Allianz whereby a dispute is reviewed internally, and that the Ombudsman would consider the matter when the applicant received a Final Response letter.

3 Coincidentally perhaps, Allianz wrote a letter dated 7 ^th April 2010 to the applicant's solicitors informing that the Notice Party was refusing an indemnity under the policy of insurance, had repudiated liability thereunder, and was treating the policy as discharged on the basis that the applicant had failed to disclose to it material facts, and the absence of a functioning alarm system.

4 Allianz issued a Final Response by letter dated 28 ^th April 2010. The applicant states that while it bears that date, it was not in fact received by him until the 19 ^th May 2010. The Final Response letter states that following receipt of the applicant's claim on the 4 ^th August 2009, and in accordance with normal procedures, Allianz appointed a firm of Loss Adjusters, OSG, to inspect the damage to the premises, who in turn appointed Manus Coffey Associates, Consulting Engineers ("MCA") to carry out an inspection and prepare a report. Allianz go on to say that during the course of these investigations the applicant informed MCA's representative that he had set the intruder alarm as he had left the house on the night of the burglary and fire on the 1 ^st August 2009, but that it had been noted that the alarm was not ringing when the Gardai arrived to the premises in response to the fire call. They said also that MCA had examined the alarm system, and reported that even though the intruders had ripped out the wires the external alarm bell ought to have continued to ring until such time as the battery expired. It appears that MCA was unable to carry out a functional test of the alarm due to the damage to the wires, but he did examine the alarm panel and found that the back up battery positive terminal had been corroded away many years ago, and found also that the external bell box was heavily corroded and that the external siren was broken. His conclusion was that the alarm system was over 20 years old and that judging from its condition it had been inoperative for many years.

5 Allianz in their Final Response letter went on to refer to the manner in which the applicant had completed the proposal form for the policy of insurance in 2004, and noted that in that form the applicant had confirmed that he had an alarm fitted, and also that the front and back doors were fitted with mortice deadlocks, and also that the ground floor and other accessible windows were fitted with window locks. They also informed the applicant that his policy renewal schedule states that "endorsement EO2 was applicable". That endorsement states: "Where a burglar alarm is installed as our requirement you hereby agree to maintain the installation in accordance with the supplier's recommendations and to have the alarm switched on and in service on all practical occasions". They stated also that the applicant had received a premium reduction because he had an alarm fitted to the premises.

6 Allianz then went on to state that the information provided by the applicant on his proposal form and his ongoing obligations set forth in the renewal schedules form the basis of the insurance contract with Allianz; and having noted that OMG had reported that the alarm system had been inoperative for many years, and also that they had observed that the ground floor windows were not fitted with locks and that the front door was not fitted with a mortice lock, Allianz concluded that the inaccurate information provided by the applicant on his proposal form represented a material misdescription which had influenced their assessment of the risk and premium calculation, and that it was apparent to them that the terms and conditions of the policy were breached by not having maintained the alarm system in an operable condition, and, accordingly, that the decision communicated to the applicant's solicitors on the 7 ^th April 2010 to repudiate the claim should, following this review, stand and that the claim would not be covered.

7 The Ombudsman in due course suggested mediation, but as Allianz was not agreeable to that process it could not proceed, and accordingly, the Ombudsman proceeded by way of investigation and adjudication. I note that in a letter dated 9 ^th June 2010 to the applicant, the Ombudsman noted that the applicant had spoken to a lady in the Ombudsman's office and had mentioned that he might refer the claim to the High Court, and stated in that regard:

"Please be aware that the Financial Services Ombudsman has sole responsibility for deciding whether or not a complaint is within the Ombudsman's jurisdiction. Section BX (3)(a) of the Central Bank and Financial Services Authority of Ireland Act, 2004 provides 'a consumer is not entitled to make a complaint if the conduct complained of is or has been the subject of legal proceedings before a court or tribunal.

Therefore if you decide to have your complaint examined by the High Court, your case in this office will accordingly be closed off. Please advise the Bureau on your decision in that respect."

8 The applicant responded by letter dated 16 ^th June 2010 confirming that he wished the Ombudsman to investigate the claim against Allianz. The Ombudsman wrote to each party inviting submissions, and those were provided in due course, each party being furnished with the submission of the other. The applicant was also provided with a copy of the MCA report provided to the Ombudsman. He himself engaged an electrician, Kieran Nevin, to express an opinion on the state of the alarm system and to comment on the MCA report, and he had provided that report to the Ombudsman. Mr Nevin takes a very different view to MCA, and in so far as there is a significant dispute between these experts and the Ombudsman reached his decision against the applicant by favouring the opinions expressed in the MCA report, the...