Court of Appeal decides that an extended warranty was a contract of insurance

An extended warranty offered to consumers which provided for repair or replacement (including for accidental damage) to digital television dish receivers and cabling was a contract for insurance and therefore fell within the regulatory framework of the Financial Service Markets Act 2000 (“FSMA”). As the company offering the extended warranty was not authorised under FSMA to do so, the Financial Services Authority sought and obtained an order that the company be wound up.

The court of appeal upheld the decision. In doing so it relied on the common law definition of insurance adopted by Channell J in Prudential Insurance Co v Inland Revenue Commissioners [1904] 2 KB 658  and rejected the submission that to be a contract of insurance a sum of money had to be paid by way of indemnity for loss. A contract of insurance is not limited to an obligation to pay money upon the specified contingency but can include the provision of a service such as repair or replacement of the insured’s property. On the wording of the warranty, it was a contract of general insurance within the meaning of Article 3(1) of the Financial Service Markets Act 2000 (Regulated Activities) Order 2001 SI 2001/344.

Although permission to appeal to the Supreme Court was refused, an application for permission may be made to the Supreme Court.

Re Digital Satellite Warranty Cover Limited [2011] EWCA Civ 1413
 

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