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Quinn hearing postponed

13 April 2010

The hearing in the Irish High Court which would have determined the fate of Quinn Insurance, due to take place on Monday 12 April, has been postponed to Monday 19.

The Irish financial services regulator secured an order last week placing the company in provisional administration – the first occasion this procedure was used.

The Financial Regulator’s case is that Quinn is in breach of solvency rules, a claim which the company denies.

Mr Justice Nicholas Kearns accepted Quinn’s application for an adjournment and gave the regulator until Wednesday to file a response.

The company will have two days to make submissions in return, so that the case can be heard Monday next week.

The court order placing the insurer in temporary administration, caused panic among the near 3,000 smaller English firms that took professional indemnity insurance with the company.

An order placing Quinn in administration would mean that the company would no longer be a “qualifying insurer” for regulatory purposes.

In turn, this is likely to constitute an “insolvency event” under the solicitors’ indemnity rules. Such a decision would require firms currently holding policies with Quinn to secure alternative cover within 28 days.

Firms failing to obtain cover would either be forced to close or to apply for cover in the Assigned Risks Pool.

Quinn’s collapse could precipitate applications by hundreds of firms to join the ARP. “The resulting huge expansion of the ARP could put its very existence in peril”, said legal risk specialist Frank Maher.

A large number of the near 3,000 currently insured with Quinn are already under significant financial pressure and may not be able to sustain further increases in premium, according to Maher. In some cases, the rises last year were up to three times what firms had been paying before.

Maher suggested that as a last resort law firms could turn to the Financial Services Authority and seek compensation under the Financial Services Compensation Scheme.

One difficulty is that the FSA has little experience in handling solicitors’ claims, he said.

Maher also said that Quinn’s insolvency could pose serious problems in respect of run-off cover. “Firms that have insurance with Quinn are likely to find it particularly hard to find alternative insurance to cover run off. It could be a real problem for lawyers about to retire and for those that are already retired”, he said.

Quinn has insisted, following the court order on 30 March, that it remained solvent. Solicitors Journal understands that other insurance companies have expressed interest in buying out Quinn’s business.

The only previous indemnity insurance insolvency was that of Independent in 2001.

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