April 26, 2010
Financial Services Act 2010 – class actions removed
The Financial Services Act 2010 received Royal Assent on 08.04.2010, being amongst the last few pieces of legislation rushed through parliament before it was dissolved.
One of the most interesting and controversial parts of the bill had been the introduction of collective actions for consumers allowing them to bring American style class actions against financial services firms, including banks and insurers as well as smaller firms providing financial advice.
However, these proposals received stiff opposition from Tory peers and the government dropped the measures in order to see the bill through parliament.
What has been included in the Act though is an amendment to previous legislation which now allows the FSA to draw up consumer redress schemes where it considers there has been “widespread or regular failure” from financial services firms and that as a result consumers have lost, or may lose, money. Previously such schemes had to be approved by the Treasury before being implemented.
Appetite remains high amongst the Labour party though for such class actions and redress schemes and it has been suggested that the proposals would be looked at again in the new parliament. How they would fare in an increasingly likely hung parliament is difficult to predict though.
Third Parties (Rights Against Insurers) Act 2010
The Third Parties (Rights Against Insurers) Act 2010 which received Royal Assent on 25.03.2010 has amended previous legislation governing the relationship between insurers and claimants. Its intention is to make it easier, quicker and cheaper to make a claim against the insurers of insolvent defendants.
The previous Act required a claimant to establish an insolvent defendant’s liability before being able to pursue a claim against insurers. This meant issuing proceedings against the defendant before being able to issue (separate) proceedings against the insurer. The 2010 Act now allows claimants to issue proceedings directly against the insurer in which all issues, including the defendant’s liability, can be established.
Insurers are now no longer entitled to rely on conditions in the policy made impossible by the insured’s insolvency or terms which render the policy ineffective due to the insured’s insolvency. The insurer is still though entitled to rely on defences against the claimant which it could have used against its own insured.
April 16, 2010
Quinn Administration Confirmed
Quinn Insurance has dropped its opposition to the appointment of administrators today and, as a result, Grant Thornton has been confirmed as administrator of the company by the Irish High Court. In our view this is classed as an Insolvency Event under the SRA’s Qualifying Insurer Agreement. Unless the SRA waives the Event under 19.1 of the Agreement then firms of solicitors holding professional indemnity insurance with Quinn will be required to obtain alternative cover within 28 days. The impact will be significant as firms may well see premiums soar. It is possible that some will not be able to obtain alternative quotes at all in which case the Assigned Risks Pool will be the only option if the firm wishes to continue to trade.
The SRA explicitly states that it does not vet or approve the qualifying insurers and a hard look should be taken at the advice given to firms by their insurance brokers.