The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian insurer has moved to ‘stay’ a Court of Appeal judgment that has major “ramifications” for the auto underwriting industry, with several accident victims already moving to reinstate old claims.

Tom Duff, Insurance Company of the Bahamas (ICB) general manager, confirmed to Tribune Business that the general insurer had served notice of its intentions to appeal the ruling to the Privy Council.

And both he and Patrick Ward, Bahamas First’s president and chief executive, said their respective companies had been contacted by auto accident victims seeking to revive rejected claims in the wake of the Court of Appeal ruling.

Appeal Court president, Justice Anita Allen, admitted her ruling “may cause some consternation in the motor insurance industry”, and it appears to have done exactly that.

The judgment, which found in favour of an Eric Antonio, who was seriously injured in a road traffic accident with a jitney, ruled that the ‘restricted driver’ clauses inserted into many auto insurance policies to restrict underwriter liability are invalid.

The Bahamian property and auto industry subsequently warned that if the judgment is allowed to stand, consumers will see significant increases in their vehicle premiums, as it introduces a heightened level of risk never considered previously by the market.

And issues are already starting to emerge in the aftermath of the Court of Appeal’s verdict. Some accident victims whose claims were rejected by insurers on the grounds that the guilty vehicle was not being driven by an ‘authorised driver’, as per the policy, are moving to re-open those cases.

“We are going to appeal the case,” Mr Duff said, with ICB the insurer who initially rejected Mr Antonio’s claim. “We have lodged notice of intent to appeal, and we have applied for a stay of execution of the judgment.

“That application for a stay has been made to the Court of Appeal. I’m just waiting to hear from our attorneys on that right now.”

Confirming that the Bahamian property and casualty sector was standing right behind ICB, Mr Duff added: “We’re all of the opinion it’s a case we have to take, we have to make, because of the wider ramifications.”

He conceded to Tribune Business that the ruling had made some rejected claimants, and their advisers, sit up and take notice.

“There have been a few attorneys who have taken advantage of the situation and written to us,” Mr Duff said. “It’s not a deluge, but they have made their situation known on behalf of their clients.

“I know there’s been one or two on our part. I’ve certainly had a couple of inquiries, I can say that.”

It is a similar situation at Bahamas First. Mr Ward told Tribune Business: “In the case of Bahamas First, there are one or two potential issues we are aware of, although they have not materialised into anything tangible.”

He added that the industry was “understanding and fully supportive” of ICB’s move to appeal the case to the Privy Council.

Insurance industry executives had previously told Tribune Business that the verdict has “really huge implications” for both insurers and businesses/consumers.

In his initial reaction to the Court of Appeal decision, Mr Duff had told this newspaper: “It has great significance to the way we do motor insurance business in the Bahamas. It’s something we’ll have to look very closely at.”

He added that if ‘restricted driver’ clauses were no longer valid, the Bahamian auto insurance industry’s risk/loss exposure would increase markedly.

And, because the sector’s risk profile had increased, underwriters would have little choice but to substantially increase the premiums paid by businesses and individual vehicle owners to compensate.

“It revolves around the ability of motor underwriters to restrict the drivers - who should/should not drive - under any given policy,” Mr Duff said. “This judgment could restrict our ability to do that.

“Until now, we’ve worked on the basis that if you restrict drivers under the policy, you can restrict your exposure. It’s a critical part of underwriting.”

Asked whether the Court of Appeal ruling, if it went unchallenged or was not overturned at the Privy Council, would result in increased premiums for Bahamian motorists, Mr Duff replied: “I would say that would be inevitable if that’s the route we have to go.

“The implications are really huge. The judgment, if it went unchallenged, it would prevent underwriters restricting drivers on any policy. The ability of insurers to select drivers, and underwrite those drivers, is a critical part of underwriting and pricing risk.

“If insurance companies are prevented from doing this, there’ll be no option but to increase premiums across the board. There’ll be no alternative.

“I’m sure that’s not what the learned judges wanted to see, but that will be a consequence of this ruling.”