Speed Read
The High Court recently delivered judgment in Chubb European Group S.E. v Financial Services and Pensions Ombudsman [2023] IEHC 74 (the Chubb Decision) which was a statutory appeal of a decision of the Financial Services and Pensions Ombudsman (the FSPO). Interestingly, the appellant insurance provider (Chubb) had been the successful party before the FSPO. Despite this, Chubb contended that the FSPO's decision contained a number of substantive findings regarding policy interpretation, which would trigger significant read across implications if unchallenged. Mr Justice Simons, in upholding Chubb's appeal, set aside the FSPO's decision simpliciter, concluding that the FSPO had erred in its contractual interpretation of the policy. The decision also contains comments on issues such as standing and the doctrine of precedent, which are relevant to FSPO decisions more generally.
Background
The FSPO complaint related to Chubb's refusal to allow recovery under the claimant's policy in respect of business interruption during the COVID-19 lockdown. The question of coverage centred on the interpretation of a notifiable disease extension in the policy, which covered losses resulting from interruption of, or interference with, the business at the insured premises following the intervention of a public body authorised to restrict or deny access to the premises, arising from the occurrence of a notifiable disease at the premises. Chubb submitted that no coverage applied in the claimant's case as the claimant was providing an 'essential service' within the meaning of the regulations made pursuant to the Health Act 1947 (as amended) and was therefore entitled to remain open for business. Chubb also made submissions that SARS-CoV-2 was not a 'notifiable disease' for the purposes of the policy and that the organism likely to result in the occurrence of a notifiable disease, in this case SARS-CoV-2, had to be discovered on the insured premises itself.
The Appeal
Notwithstanding the fact that the FSPO found in favour of Chubb, Chubb appealed the decision on the basis that it contained a number of comments that created onerous read across implications for the insurer.
The following issues were raised in the appeal and addressed by Mr Justice Simons in his judgment.
- Jurisdictional Basis
Mr Justice Simons held that it was imperative that the FSPO identify the jurisdiction basis upon which a complaint has been decided. Specifically, it was held that the FSPO's decision should record the statutory ground(s) upon which each element of a complaint is upheld, and on what basis. Whilst acknowledging that a decision of the FSPO is not required to have the structure or level of detail that a Court judgment may have, Mr Justice Simons held that it should be structured in such a way that the reasoning and evidential support for the reasoning may be 'discerned without undue difficulty'.
- A Winner's Right to Appeal
The FSPO contested Chubb's standing to appeal in circumstances where it believed the underlying legislation did not allow for a so-called 'winner's appeal'. The High Court held that the statutory right of appeal was not confined to an appeal against the outcome of a complaint and that the appeal was against the 'decision' described under section 60(3) of the Financial Services and Pensions Ombudsman Act 2017 (the FSPO Act), which embraced both the outcome and the grounds for that outcome.
- 'Serious and Significant Errors' in Contractual Interpretation
In upholding Chubb's appeal, Mr Justice Simons concluded that the FSPO's approach to contractual interpretation was vitiated by 'serious and significant errors1'.
Firstly, Mr Justice Simons held that the FSPO had failed to apply the established legal principles of contractual interpretation as set out in Brushfield Ltd (T/A The Clarence Hotel) v. Arachas Corporate Brokers Ltd2. The Court held that the FSPO had considered the subjective views of the insured in its interpretation, while the principles as set out in Brushfield require that written contracts are to be interpreted objectively. It was held that the FSPO had failed to explain why a consideration of the subjective views of the policyholder were allowed in circumstances where the ordinary wording of the policy posited an objective test. In that regard, it was also held that the FSPO had failed to identify what principle of contractual interpretation was relied upon to displace the ordinary and natural meaning of the policy wording.
The Court also found that the findings of the FSPO were in breach of fair procedures as the FSPO had not engaged with submissions made on behalf of the insurer and/or failed to provide reasoning for not following those submissions.
The FSPO argued that the threshold of a 'serious and significant' error required an appellant to demonstrate that the outcome of the investigation of a complaint might have been different if the error had not been made. However, the Court concluded that 'the fortuity of its having reached the right answer for the wrong reasons does not provide a shield against an appeal 3.'
Finally, following an analysis of the relevant case law, the Court held that it would be inappropriate to determine the question of contractual interpretation de novo and it was the Court's provisional view that the appropriate order would be to set aside the FSPO's decision simpliciter with no formal order for remittal. The Court subsequently heard submissions from the parties on this issue and made a final order to set aside the decision of the FSPO simpliciter.
- Read Across Obligations
The Court held that the FSPO's decision had the potential to trigger read-across obligations under the CBI Supervisory Framework for Covid-19 and Business Interruption Insurance4. The Court determined that the FSPO had purported to reach conclusions regarding the interpretation of the policy, which affected not only the policy in question, but also other similarly worded policies.
- Doctrine of Precedent
Mr Justice Simons also made a number of obiter comments regarding whether the FSPO was bound by its previous decisions. The FSPO had submitted that the doctrine of precedent does not apply to its decisions and that while the FSPO strives to achieve consistency in its investigations, every complaint must be investigated on its own individual merits. The Court stated that while it was not necessary for the Court to reach a concluded view on the question of whether the doctrine of precedent applies to decisions of the FSPO, the FSPO is required to act reasonably, 'as with any other quasi-judicial tribunal5'.
Importantly, the Court noted that: '[t]he existence of an earlier decision on the form of policy wording is, at the very least, a relevant consideration in the context of a subsequent complaint based on the same or similar wording. It would undermine confidence in the integrity of the decision-making process were the Ombudsman to dismiss an earlier decision, on the same question of law, as immaterial 6.'
While the Court acknowledged that it would not be necessary to reach a concluded view on the question of whether the doctrine of precedent applied to the FSPO in the appeal, it observed that the FSPO must act reasonably owing to an implied general obligation to treat 'like cases alike unless there is good reason for not doing so7.'
Key Takeaways
The Chubb Decision provides welcome guidance on a number of important issues relevant to regulated entities and FSPO complaints generally:-
- The decision confirms that a statutory appeal is available to a party in whose favour an FSPO legally binding decision has been found. It was held that an appeal is not confined to an appeal against the overall outcome of the investigation of a complaint but also allows for an appeal against the grounds for the decision;
- The Court's comments regarding the doctrine of precedent and FSPO decisions, while obiter, offer some guidance on this issue, stating that there is a general obligation to act consistently by treating like cases alike unless there is good reason for not doing so; and
- The decision restates the principles of contractual interpretation as set out in the Brushfield case, in particular that written contracts are to be interpreted objectively.
For more information, please contact Sarah Murphy, Partner, James Grennan, Partner, Linda Collins, Associate, Nadia Skelton, Solicitor or your usual A&L Goodbody Disputes and Investigations team or Insurance & Reinsurance team contact.
With thanks to Catherine Moloney for her assistance in preparing this piece.
1 Chubb European Group S.E. v Financial Services and Pensions Ombudsman [2023] IEHC 74, para 75
2 [2021] IEHC 263
3 Chubb European Group S.E. v Financial Services and Pensions Ombudsman [2023] IEHC 74, para 86
4 Available here
5 Chubb European Group S.E. v Financial Services and Pensions Ombudsman [2023] IEHC 74, para 39
6 Chubb European Group S.E. v Financial Services and Pensions Ombudsman [2023] IEHC 74, paras 39, 40
7 Chubb European Group S.E. v Financial Services and Pensions Ombudsman [2023] IEHC 74, para 39
