The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian motor insurers will likely seek an injunction to stop a Court of Appeal ruling that invalidates ‘restricted driver’ clauses from taking effect, warning that it “attacks the heart” of risk underwriting.

Suggesting that the industry will “come together as one” to fight the appellate court’s verdict at the Privy Council, Patrick Ward, Bahamas First’s chief executive, said a ‘stay’ of its judgment was necessary to protect insurers - and their clients - from a “wide-ranging potential impact”.

He was backed by Tom Duff, general manager of Insurance Company of the Bahamas (ICB), who told Tribune Business that if insurers were unable to restrict policy coverage to just a few ‘authorised drivers’ - the very thing the Court of Appeal has ruled is invalid - it was good, experienced drivers who stood to lose the most.

Tribune Business revealed last week how the Court of Appeal, in a judgment written by its president, Justice Anita Allen, found that the ‘restricted driver’ clauses contained in most Bahamian auto policies were invalid.

Currently, Bahamas-based auto insurers mitigate their risk exposure by restricting who drives the vehicle underwritten by the policy.

This means that their liabilities will be restricted just to accidents involving drivers who appear on the Certificate of Insurance and insurance policy. No payouts are incurred if ‘unauthorised drivers’ are responsible.

But the Court of Appeal’s judgment, in a case involving ICB, the carrier through which BISX-listed J. S. Johnson places much of its general business, ruled that such policy clauses are “of no effect”.

Agreeing with Justice Allen that her ruling, which was supported by the two other appellate justices, would have “significant ramifications for the insurance industry” if allowed to stand, Mr Ward said it had dramatically increased underwriters’ risk exposure.

“There’s a certain amount of uncertainty that’s been thrust into the normal practice of how Certificates of Insurance have been issued and written, certainly as it relates to policy coverage and, in particular, as it relates to insureds that happen to be a corporate entity as opposed to a natural person,” Mr Ward said.

The Court of Appeal’s judgment involved one Eric Antonio, described as “the innocent victim” of a January 29, 2004, road traffic accident.

He was seriously injured in an accident caused by the driver of bus 304, owned by Convenient City Transit Services Company. ICB had insured the bus, but the driver - who was operating it with the company’s “authority and consent” - was not named as an ‘authorised driver’ in the Certificate of Insurance.

ICB, as result, denied it was liable for Mr Antonio’s injuries, and the $521,807 judgment he and his attorneys, Cedric Parker & Company, subsequently obtained against Convenient and its driver.

The Court of Appeal, though, ruled that ICB needs to pay up, and Bahamas First’s Mr Ward expressed concern that the judgment might “re-open” past (and current) cases where auto insurers refused to pay claims for accidents caused by ‘unauthorised drivers’.

While some incidents might be barred by the so-called ‘statute of limitations’, Mr Ward indicated that the insurance industry was likely to seek an injunction to ‘stay’ the Court of Appeal ruling until the Privy Council appeal was heard

“It’s in the interests of everyone concerned to have some kind of standstill position so that the ruling of the Court is stayed prior to going to the Privy Council, so that all rulings and decisions in the past are not arbitrarily dealt with until that case is heard,” Mr Ward told Tribune Business.

“Until that happens, I don’t think it’s fair. We’re open to all kinds of issues based on this ruling, particularly because it has such a wide-ranging potential impact from a socio-economic standpoint.”

Acknowledging that the Court of Appeal verdict had created “widespread concern” in the Bahamian auto insurance sector, Mr Ward said: “There are huge implications for insurance from a cost perspective, and by extension, premium levels for clients.

“You introduce a level of risk that was not previously contemplated, and I think it will result in corporate entities, in particular, imposing far more stringent policies as to the use of company property.”

Otherwise, Mr Ward warned, Bahamian companies could find their auto insurance premiums skyrocketing due to the major increase in risk.

Mr Duff, meanwhile, said the insurance industry was set to meet on the issue in the coming days. “I think we’re all of like minds,” he said.

“We’re pretty much in agreement that we have to pull together and fight this judgment.”

Giving a deeper analysis of the judgment’s implications, Mr Duff said all auto insurers based premium prices on the underlying risk -the age, ability, experience and track record of drivers authorised to use a particular vehicle.

Implying that the judgment effectively cut across this process, he told Tribune Business: “If we get to the stage where insurance companies cannot restrict drivers, insurance companies will be unable to assess the commensurate risk, and will then have to apply broad-based premium increases.

“The end result is that good drivers with the proper experience will not get the benefits (reduced premium) that they would if their policy was restricted. That’s why we’re prepared, as an industry, to fight this judgment, as it really attack the whole purpose of motor underwriting.”

Also giving the ‘unity’ message was RoyalStar Assurance’s managing director, Anton Saunders, who confirmed that all underwriters were studying the ‘Antonio judgment’.

“It’s going to affect the whole industry legally, what we can do, what we can’t do. It’s going to impact all of us,” he told Tribune Business. “As insurers, can we exclude certain things and certain people?

“It’s going to affect the way we do things in this industry, the functioning of the insurance industry. We have to all stand together and push the appeal to the Privy Council, so that we can all know whether that’s the law we’re supposed to be following.”