The English Court of Appeal has upheld the decision of the English High Court in Re Digital Satellite Warranty Cover Limited to wind up three companies held to be conducting insurance business without the requisite UK Financial Services Authority (“FSA”) authorisation.
The companies, which were not part of the Sky group, provided extended warranties to Sky satellite customers. These warranties covered repairs or replacements of satellite equipment in the case of specified damage, breakdown or malfunction.
The Court decided that the warranties came within Class 16 insurance (miscellaneous financial loss). The Court found that the risk was “essentially a financial one” and that the warranties constituted contracts of insurance against risks of loss attributable to the property owner incurring unforeseen expense. The judge reasoned that a contract covering the repair and replacement of equipment was essentially the same as one which provided an indemnity for the costs involved in such repair and replacement.
As part of its case, the FSA suggested that there was a catch-all subclass within Class 16 in the EU Non-Life Directives that was intended to apply to any contracts of non-life insurance that do not fall within any other class or subclass. The Court agreed with this stating “…Class 16 (which differs significantly from Class 16 was intended to be the catch-all which the FSA contends for and is not limited to residual cases of financial loss.”
Insurance under Class 16(b), as implemented by the UK legislation, appears broader than its equivalent under the Directives (and the Irish implementing legislation). The English Court of Appeal noted that the Directives constitute minimum harmonisation measures and therefore they do not exclude EU member states from extending regulation to a wider class of ‘benefits-in-kind’ insurance. The distinction between the subcategories of miscellaneous financial loss in Ireland and the UK could mean that, while Re Digital might be persuasive in an Irish court, it is not clear that the same outcome would be reached in Ireland.
The case highlights the consequences of crossing the fine line between providing insurance cover and providing a warranty.
View a previous article on the case here.
Contributed by Gillian Young.
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