Last week, the High Court found Genworth Financial Inc. (“Genworth“), liable to pay losses to AXA in the potential sum of £265 million, in respect of compensation that AXA had paid to settle payment protection insurance (“PPI“) misselling claims against two Genworth subsidiaries that were acquired by AXA.
In 2015, AXA acquired two companies from Genworth – Financial Insurance Co. Ltd and Financial Assurance Co. Ltd (the “Companies“). The Companies underwrote PPI policies that Santander marketed and sold to the public.
Between 2015 and 2017, AXA paid out significant amounts to settle PPI misspelling claims.
AXA then sued Genworth in proceedings issued in December 2017. It claimed that Genworth had agreed to pay 90% of all relevant distributor misselling losses, as part of the acquisition deal. AXA asserted that the share purchase agreement meant that Genworth was liable to pay losses, including, liabilities, penalties, fines and costs incurred by the Companies in relation to the PPI misselling.
Genworth argued that the losses should be reduced for PPI claims that AXA had not properly contested. Genworth also issued a counterclaim seeking a declaration from the Court that it was not liable for charges payable under a complaints handling agreement, or claims made under an agreement between Santander and the Companies pledging not to demand damages from each other.
Genworth tried to bring Santander into the dispute. It alleged that Santander should be liable for the losses as it marketed and sold the PPI policies, in accordance with an agreement between Santander and the Companies. Santander disagreed. It argued that its agreement with Genworth did not include any subrogation terms and, as such, it was not liable.
The Court found that Genworth was “… obliged to pay ‘on demand’ an amount equal to 90% of all the relevant distributor misselling losses, which … means on a demand by AXA in the amount equal to the costs incurred“. It added that there is “no express provision” requiring AXA to accompany its demand with evidence that it has taken “all defences reasonably available to them.”
The Court also agreed with Santander and rejected Genworth’s counterclaim, finding that “no rights of subrogation arise“, thereby rejecting the proposal that Santander is liable.
A Genworth representative has stated that the company is evaluating the current ruling while preparing for the upcoming damages hearing in March 2020, at which the amount payable by Genworth will be determined.