The High Court has ruled that the insolvency of an oil distributor’s buyer occurred within the period covered by a catastrophe credit insurance policy, even though the winding-up order was made after the policy expired.
Mr Justice Gilligan delivered judgment on 25 November 2005 on a preliminary issue agreed by Emo Oil Limited and Sun Alliance and London Insurance plc. The question was whether, under the policy and section 220(2) of the Companies Act 1963, the buyer’s insolvency occurred during the insurance period.
Emo Oil presented a winding-up petition against customer Dev Oil & Gas Limited on 29 August 2002. The policy, which had been extended through 31 August 2002, required an insured buyer’s insolvency to occur during the policy period. The winding-up order followed on 11 September 2002.
Emo Oil argued that section 220(2), which deems a court winding-up to commence when the petition is presented, meant the liquidation occurred within the policy period. The insurer argued that the policy referred to the occurrence of liquidation, which in a compulsory winding-up required a court order, rather than to a deemed commencement date.
The judge distinguished a UK pension scheme case that treated a company as going into compulsory liquidation when the winding-up order was made. He preferred the approach in an Irish insolvency decision and a UK case, concluding that the issue here concerned the policy’s meaning in light of Irish law and section 220(2).
Because a winding-up order was made in respect of Dev Oil, the judge held that its liquidation occurred on the petition date, 29 August 2002. He resolved the preliminary issue in Emo Oil’s favour: the buyer’s insolvency occurred within the insurance period.
The judgment did not decide whether Dev Oil was in fact an insured buyer, whether its debts qualified as insured losses, or whether Emo Oil was entitled to an indemnity. Emo Oil had alleged a net loss of €647,990.72 after a VAT deduction; the insurer had not admitted those matters.