Official Receiver's Insurance

August 2012

Official Receiver's Insurance (ISCIS)

Introduction 

1. Why does the official receiver need insurance?

In order to prevent the possibility that an asset may be lost through theft or destruction at a loss to the estate, the official receiver must ensure that all assets which cannot be realised or disposed of immediately are adequately insured.

The insurance must cover:

  • the value of the assets to the estate
  • where there are premises involved, the risk of any injury to a third party (known as public liability) as this could result in a damages claim being brought against the official receiver.  

2. Matters for consideration

The decision as to whether or not to insure is at the official receiver’s discretion and will depend upon the facts of the case. However, the rule is that in general, it is better to insure than not to insure.

The official receiver should consider the cost of obtaining insurance against the value of the assets and the risk of personal liability on his/her part if any asset is lost or destroyed. In addition, the official receiver will need to consider whether insurance is needed to cover the risk of any liabilities arising from negligence on his/her part or as an owner or occupier of premises.

When the official receiver becomes responsible for an insolvent’s property (including unoccupied premises, motor vehicles, etc.) he/she has a duty of care to limit the risks of injury to any third parties as soon as possible, for example, by removal of the assets or improving the security of the premises. In such circumstances, the duty of care will not be satisfied by the fact that the official receiver has taken out insurance, which will serve only to protect the official receiver from a monetary liability. The appropriate action must still be taken to deal with the risk.

If the cost of any insurance, security or environmental hazard precautions required are likely to exceed the net benefit to the estate, the official receiver must disclaim his/her interest in the relevant assets as soon as possible.

If the official receiver is unable to effect insurance or if the premium is very expensive it may be prudent to arrange an early sale of the assets. Even then some short term or restricted cover insurance may be necessary.

In the case of a property with a value less than the charges outstanding on it, there is no need for the official receiver to take out insurance cover other than in respect of public liability. The official receiver should notify the mortgagees that he/she does not intend to insure the property so that they can take the necessary steps to protect their interest, if they have not already done so.

For further information see Technical Manual Chapter 49. For details of the “Willis Insolvency Open Cover Insurance”, reference should be made to Technical Manual Chapter 49 Part 3 and the “Willis Operating Manual for the Insurance Facility for Insolvency Practitioners” (Willis Manual) available HERE.

3. What if the insolvent has existing insurance cover?

If there is insurance cover already in place at the date of the bankruptcy or winding-up order, the official receiver should obtain details of the insurance companies together with the policy number(s), the current position regarding the payment of premiums and the expiry date of the policies in question. The policy documents should be recovered at the earliest date.

If the official receiver decides to continue the insolvent’s existing insurance it is recommended that the minimum requirement of cover is equal to the cover available under the official receivers’ automatic scheme (see paragraph 4). If the official receiver is satisfied that the existing insurance(s) does provide sufficient cover, he/she may exercise discretion and continue with the policies as they stand. The insurers should be informed of the official receiver’s interest in the policies immediately together with written confirmation of the cover still required.

The policy document(s) should then be sent to the insurers so that they can be endorsed with the official receiver’s interest in them. See Technical Manual Chapter 49 Annex 2 for the form of wording to use to ensure the official receiver’s interest continues to be protected.

Note: Consideration should also be given as to whether the insurance already in existence is adequate or subject to insurance averaging.  It is standard practice in the insurance industry to apply an insurance averaging clause where the risk to an asset is uninsured or under insured to its full re-instatement value. If this averaging clause is applied, the insurer is entitled to reduce any claim payment, proportionate to the under-insurance.   See Technical Manual paragraphs 49.10A and 49.10B for further information on insurance averaging.

Where it is felt that the existing cover should be terminated, the insurance company must be notified in writing as soon as possible. It is possible that the official receiver may obtain a refund of premium in such a case. The official receiver will continue to follow up the insolvent’s pre-insolvency insurance and obtain refunds if appropriate.

Note: In the event that there are outstanding claims or the possibility of claims to be made on the policy, it may be prudent to leave the policy in force until this is resolved. Such circumstances should be drawn to the examiner’s attention for a decision to be made regarding the termination of cover.

4. Automatic insurance scheme

The official receiver’s automatic insurance scheme is arranged with Willis Limited and operates on the basis that the required cover will be automatically available to an official receiver for any case requiring insurance (with some exceptions – see paragraphs 6 and 7). A copy of the Willis Manual can be found HERE.

5.Effecting insurance cover and cancelling when no longer required

(Amended February 2014)

“Willis Online” should be used to obtain insurance for smaller non-trading cases under the open cover insurance scheme. The criteria for the type of cases that are suitable and can be covered under this scheme are set out in the Technical Manual Chapter 49 at Annex 3 The official receiver is required to inform Willis as soon as possible after his/her appointment where insurance is required for an asset, however the contract with Willis does provide 30 days automatic insurance cover from the date of the official receiver’s appointment. If an asset is discovered after the 30 days following the official receiver’s appointment, cover will only apply from the date Willis is notified of it.

See paragraph 12 for the action to be taken where the case is handed over to an insolvency practitioner and insurance is in place.

It is imperative that regular audits of insurance are undertaken by the official receiver and notification given to Willis to cancel the insurance where a decision or event occurs rendering the insurance unnecessary.  Notification to Willis should usually be given within 5 working days of the insurance no longer being required.

Long term asset units (LTAUs - formerly RTLUs) can access Willis Online, but will not be invoiced for the insurance provided.  The live case facility provides a box which can be marked to indicate that the case has been transferred to the LTAU/RTLU; this is only available as a monitoring tool to official receivers, cases requiring insurance are not transferred to the LTAU workflow on ISCIS. For further instructions on how to deal with cases transferred to LTAUs, refer to paragraph 8 of the ORBS Willis Online and Insurance Guidance available HERE.

Willis only invoices the originating office for insurance provided when the cover has been cancelled, rather than on a monthly basis.  Invoices for case related insurance are charged to the relevant insolvent’s estate by EAIPS, once they receive the approved invoice from the local office.  Following processing of the daily payment batches, ISCIS totals all monies due to Willis, which are transferred as a lump sum payment using BACS.  A remittance advice letter is also generated and sent to Willis.

For detailed instructions on how to apply for and cancel insurance using Willis Online, refer to the ORBS Willis Online and Insurance Guidance available HERE and also Technical Manual Chapter 49, paragraph 49.27.

6. Larger cases and unusual risks

Where the official receiver requires insurance for larger cases where the sums insured are exceeded and/or the criteria for small non-trading cases are not met, Willis will require the official receiver to contact Willis by telephone to arrange suitable cover. Telephone contacts and email details for Willis personnel are available HERE.

They will run through a basic series of questions including the name and address of the business, date of appointment and business description. Once agreement is reached as to the insurance cover required, Willis will email the “Scheme Abbreviated Questionnaire” to the official receiver, which should be completed with the agreed details and returned to Willis.  This type of cover will normally be arranged by the examiner and the cost of the premium agreed. High premiums should be discussed and approved by the assistant official receiver/official receiver/Technical Section, where appropriate. See the Technical Manual paragraphs 49.28 to 49.28C for further information and guidance on classes of risk which fall outside of the automatic insurance facility.

7. Process for requesting insurance on overseas properties

The Willis open cover scheme no longer provides automatic cover for overseas properties.  As with other unusual items, Willis can however provide insurance for properties overseas ‘off scheme’ by tendering for insurance provision on an ‘open market’ basis with the scheme’s insurers.  This is handled by the Willis Corporate Division, based at Leeds.  See HERE for contact details for Willis staff.

Note 

(i) “Off scheme” cover for overseas property insurance is not automatic

(ii)  Premiums are payable upon invoice – particularly important with overseas business as there may  be taxes payable in the overseas territory that Insurers are liable for from the date the cover commences and non-payment of the premium may result in the cancellation of cover by the insurers.

To request insurance on overseas property cases these steps should be followed:

  • Contact a member of the Willis Corporate Division to ask for insurance for an overseas property
  • After receiving the official receiver’s request for insurance for an overseas property, your Willis case handler will send you an insurance questionnaire.
  • The insurance questionnaire must be completed for all overseas cases before any quotes for insurance can be obtained.
  • Once a completed questionnaire has been received by your Willis case handler he/she will seek terms from the scheme provider.
  • A formal quotation outlining the terms offered by the scheme provider will be sent to you.
  • Willis requires formal acceptance from the official receiver of any terms before cover can be confirmed with insurers.
  • If you are in any doubt about the terms or costs involved you should consult with your manager or the examiner/AOR before cover is effected.
  • After confirming cover is in place with insurers your Willis case handler will confirm the same back to you.
  • Willis will issue an invoice which needs to be settled upon receipt – this will detail any overseas taxes applicable which must also be paid to the insurers with the premium.
  • Policy documentation will be produced by the insurers and sent to Willis.  Once this has been checked by Willis it will be issued to you.

8. Unoccupied Premises

Willis have negotiated a special facility for the types of unoccupied premises detailed in their “Unoccupied Premises Code of Practice” set out at Appendix 5 of the Willis Manual available on the ORBS intranet page HERE.

Whilst in the majority of cases the property is unlikely to be the official receiver’s responsibility for more than 30 days, if there is a possibility that the official receiver’s responsibility for the premises is likely to continue for a longer period, he/she will need to arrange for the building to be secured and services to be turned off unless required to maintain security/safety.  In high risk areas the premises will need to be boarded up and inspected on a regular basis, and in other areas they need to be boarded up or inspected on a regular basis. As these duties to comply with the unoccupied buildings code of practice are fairly onerous, there may be occasions when Willis will be able to waive certain requirements. However each case must be reviewed on its own merits.

9. Employers’ Liability Insurance and Motor Vehicles Insurance (amended October 2013)

Each year Willis provides to The Insolvency Service “Certificates of Motor Insurance and Employer Liability” which are blanket certificates covering The Insolvency Service and its staff for all cases where there are employees (of the insolvent), or motor vehicles remaining on the case. With regard to motor vehicles, this insurance is activated when the official receiver has advised Willis of the details of the vehicle and the need for the insurance using Willis online.  Cancellation of the policy must be notified to Willis as soon as the insurance is no longer required, to prevent the official receiver from continuing to pay for unnecessary premiums.  See also paragraphs 15 and 16 below where insolvency proceedings are stayed or the bankruptcy order annulled.  Copies of the current Employers’ Liability and Motor Insurance Certificates are available on the intranet HERE. 

Since April 2012 the Financial Services Authority Regulations require all insurers to publish all current Employers’ Liability Policies on a website, to allow employees to search for insurance held by their employer or former employer should they need to claim against their Employers’ Liability Policy for injury or disease.  Further information on this requirement is available in the Technical Manual at paragraphs 49.14A and 49.14B. 

10. What happens where a claim is made against an existing insurance for a pre-insolvency accident?

Where an accident has occurred before the date of insolvency, and a third party has a claim against the insolvent, it is usual for the third party’s insurers to make a claim against the insurers of the insolvent where they have already paid out their client under the terms of their insurance. If the insolvent was uninsured or the policy had lapsed at the date of the accident, it is likely the other party’s insurers will submit a claim in the insolvency proceedings for the outstanding amount.  Where the accident occurred and the debt existed prior to the date of insolvency, the debt will be a provable debt.  See also Technical Manual Chapter 49, paragraph 49.24B.

11. Third party goods

The official receiver does not have a statutory duty to protect third party property although he/she does have a duty to take positive steps to prevent the destruction of goods.

The official receiver should, as a matter of urgency, notify the owners of any third party goods of the bankruptcy order/winding-up order and make suitable arrangements for their collection. If any third party goods are not insured, the official receiver should also inform the owners that their goods are un-insured and that the official receiver accepts no responsibility for their theft, loss or damage.

When the official receiver agrees to keep goods for a third party, he/she has a duty of care to the owner to protect the goods. In such circumstances, the official receiver may wish to obtain cover against claims that he/she had failed to exercise adequate care of third party goods and this should be arranged by contacting Willis and discussing the individual merits of the case. However, such a course of action should not be taken without the specific instructions of the examiner. No expenditure should be incurred by insuring third party property unless prior authority is received from Technical Section.

12. What if an Insolvency Practitioner is appointed after cover has been effected?

Details of all insurance cover effected by the official receiver should be included in the trustee or liquidator’s record book. The insolvency practitioner should also be given details of any premium payments made. The official receiver should cancel any insurance with Willis immediately after handing over the estate, preferably within 5 working days. It is for the official receiver to pay the account for insurances effected by him/her and any debit balance resulting after the estate has been handed over should be transferred to the insolvency practitioner.

For further information see Case Help Manual part: Insolvency Practitioners

13.  Payment of premiums

Willis only invoices each office for insurance cover when the relevant insurance is cancelled, not on a monthly basis. The official receiver must approve the invoice locally and forward the authorised invoice for payment of premiums to EAIPS, see paragraph 5 above.  Payment of the premium due is regarded as an expense in preserving the assets of the estate. A debit balance may be incurred or increased to pay any necessary insurance premium without the need for the official receiver to obtain specific authority to do so but such balances should be managed carefully. 

14. Can the official receiver use other insurers?

The official receiver can seek insurance cover elsewhere only where Willis is unable to provide the insurance cover sought by him/her. This is only likely in exceptional circumstances and before obtaining cover from an alternative source, the official receiver should consider the cost of the likely premium in relation to the value of the asset(s) he/she is trying to insure. See also paragraph 3 and Technical Manual paragraphs 49.14A and 49.14B regarding averaging clauses.

15. What happens if a bankruptcy is stayed or liquidation proceedings are stayed for a limited period?

Where bankruptcy proceedings are stayed or liquidation proceedings are stayed for a limited period, the official receiver can leave any insurances already obtained in force but should be wary of seeking any new insurance cover as there is no obligation for the official receiver to insure in such circumstances. The bankrupt/director(s) should be notified by the official receiver that the property is not insured as a result. Where necessary, the official receiver can seek court directions as to the appropriate course of action. 

16. What happens if the bankruptcy order is annulled (including where an individual voluntary arrangement is approved), winding-up order rescinded or liquidation proceedings are stayed altogether?

In the above circumstances, the official receiver should cancel any insurance arranged by him/her and notify the bankrupt/director(s) of the situation. The premium paid will be recoverable as part of the official receiver’s expenses. Any keys that the official receiver has taken into possession from the bankrupt/director(s) should be returned at the earliest opportunity to prevent potential liability for the loss of the former insolvent’s property.

Where an individual voluntary arrangement (IVA) is entered into after the making of a bankruptcy order,  any assets included within the IVA cease to be comprised in the insolvency estate, therefore any insurance provisions relating to those assets should be cancelled.  Any assets not included in the IVA but remaining under the control of the official receiver will require continuing insurance cover as before, pending any annulment order or other order of the court as to their disposal, see Technical Manual paragraph 49.19A.

17. Making a claim

If it is necessary to make a claim, the official receiver should deal directly with Willis (out of hours contact details for Willis personnel can be found on the ORBS intranet Willis contact page – see note below)  However, Technical Section should be consulted if there are any difficulties in agreeing the claim.

Note: Any queries or correspondence regarding insurance matters should be referred to Willis. Contact numbers and email details for members of the Willis Insolvency team can be found HERE.  See also Technical Manual paragraphs 49.30A, 49.30B and 49.30C for further information on actions required when making a claim, depending on the circumstances of the claim. 

Notes: 

  • If assets prove to be worthless or are found to belong to third parties, any cover effected by the official receiver should be cancelled immediately.
  • Cover may have to be arranged for assets that are being temporarily stored at the official receiver’s office, e.g. computers removed from premises for the purpose of extracting accounting information.
  • If an administrative receiver is in office when the winding-up order is made, the official receiver should only insure those assets which are not covered by the fixed or floating charge(s).
  • Losses resulting from theft by the bankrupt or a director in a company case will not be covered unless the locks have been changed.

Where can I find out more?

Insolvency Rules 1986

4.218(1) (a), 6.224(1) (a) Priority of expenses

7.39 Award of costs against official receiver

Technical Manual

Chapter 6 - Appeals, stays rescissions and annulments

Chapter 40 – Creditors and Liabilities

Chapter 49 - Insurance

Chapter 66 - Computerised Accounting Records

Case Help Manual

Insolvency Practitioners

 

OR's Insurance Flowchart 

 

Procedure

1 Where insurance cover already exists, refer to examiner for decision as to whether the existing cover is to be relied on.

2 If existing cover is to be continued, notify insurer(s) of official receiver’s interest and forward policy documents for endorsement.

3 If existing cover is not to be relied upon, notify insurance company as soon as possible. Request that any pro-rata refund of premium is made payable to the official receiver.

4 Where there are third party goods, notify third party of bankruptcy order/winding-up order straightaway and make arrangements for goods to be collected. Inform third party in writing that the official receiver will not be held responsible for theft of, or loss or damage to uninsured goods.

5 If a third party asks the official receiver to keep goods on his/her behalf, refer matter to examiner for decision as to whether goods should be retained and, if so, whether the goods will need to be insured. To record instructions to effect insurance, or to document when insurance has been effected, a note should be made on ISCIS under the notes tab for the relevant case.  Use Note Group “General Administration” and Note Type “Insurance to be effected”. Do not record insurance under the asset tab.

6 If not already arranged by the examiner, pass details of the insurance required to the designated person, according to local office practice. Amend ISCIS notes tab accordingly as detailed at point 5 (above).

7 Willis Online (link available HERE) should be used to obtain insurance as soon as the official receiver becomes aware that insurance is required.  The criteria for the type of cases that are suitable and can be covered under this scheme are set out in Technical Manual Chapter 49, Annex 3. This provides 30 days automatic insurance cover from the date of the official receiver’s appointment. If an asset is discovered after the 30 days, cover will only apply from the date Willis Ltd is notified of it.

8 Insurance can be obtained for cases falling under the criteria outlined in Technical Manual Chapter 49, Annex 3 using Willis Online.  After logging into the Willis Online system, select “live case information” followed by “new item”, and generate a form to be completed, detailing the insurance required.  This information then allows Willis to calculate an appropriate premium. See the ORBS Willis Online and Insurance Guidance available HERE for detailed instructions as to how to input a request for new insurance using Willis Online.  Insurance obtained should be documented on ISCIS under the notes tab against the relevant case (refer to point 5 above).

9 The insurance must be cancelled if the case is transferred to an insolvency practitioner and the official receiver must give details of the insurance cover and cancellation to the insolvency practitioner on handover. Insurance should be cancelled within 5 days of the appointment being made. Amendment of  insurance on Willis Online can be completed by accessing the Willis Online system in the usual way, and selecting the hyperlinked case name.  Using the “edit item” facility, any amendments required can be made, the amendments saved and the “edit item facility” closed.  The same facility can be used to cancel insurance, refer to the ORBS Willis Online and Insurance Guidance available HERE for full instructions on cancelling insurance via Willis Online. 

10 For larger cases where the sums insured are exceeded and/or the criteria for small non-trading cases are not met, and for overseas properties, Willis will require a telephone call to arrange suitable cover. This type of cover will normally be arranged by the examiner and the cost of the premium agreed. The “Scheme Abbreviated Questionnaire” will be emailed to the official receiver by Willis, and should be completed on receipt and returned immediately. High premiums should be discussed and approved by the assistant official receiver/official receiver/Technical Section, where appropriate.

11 Willis has negotiated a special facility for the types of unoccupied premises requiring insurance as detailed in the “Unoccupied Premises Code of Practice” set out in Appendix 5 of the Willis Manual available HERE.  This type of cover may already have been arranged by the examiner.

12 Willis provides annually Certificates of Motor Insurance and Employer Liability Insurance. These are blanket certificates covering the official receiver for all cases where there are employees (of the insolvent) or cars remaining in the case.  However this insurance is only activated when the official receiver has advised Willis of the details of the vehicle and the need for the insurance via Willis online. Copies of the current Employers’ Liability and Motor Insurance Certificates are available on the intranet HERE.

Insolvency Practitioner appointed

13 If the estate is to be handed over to an insolvency practitioner, details of any insurance effected by the official receiver must be recorded in the trustee/liquidator’s record book together with a note as to whether or not the premiums have been paid.

14 All documents relating to any insurance must be handed over to the trustee/ liquidator, copies of which should be placed on the office file.

15 Details of any premiums paid by the official receiver will be included in the trustee/liquidator’s cash book on handover. If the estate has been handed over before the invoice is received from Willis, the invoice should be authorised by the originating office and forwarded to EAIPS for payment, with any resultant debit balance being transferred to the insolvency practitioner.

(Amended February 2014)

16 The official receiver should cancel any insurance effected by him/her immediately after handing over of the estate or as soon as insurance is no longer required (this is expected to be within 5 working days).  Willis never cancels insurance automatically, cover will only cease when the OR directs Willis to cancel the insurance. Record the cancellation date on Willis online, entering the date of cancellation into the “Date off” cover field (see ORBS Willis Online and Insurance Guidance available HERE). The cancellation of the insurance should be recorded on the ISCIS notes tab, using the Note Group “General Administration” and Note Type “Insurance to be effected”. Willis will invoice the originating office following cancellation of the insurance.  Following the official receiver’s authorisation, the invoice is then forwarded to EAIPS for payment.

Stay of proceedings (bankruptcy), stay for limited period (company)

17 Where there is a stay of proceedings any insurance already obtained can be left in force. No new insurance cover should be sought as there is no obligation for the official receiver to insure in such circumstances. If cover is due to expire before the end of the stay period refer the matter to the examiner for further instructions.

Bankruptcy order annulled or winding-up order rescinded, liquidation proceedings stayed altogether

18 When a bankruptcy order is annulled or a winding-up order rescinded or liquidation proceedings stayed altogether, any insurance effected by the official receiver should be cancelled immediately. Following cancellation, Willis will invoice each originating office for the policy premiums incurred, these should be approved locally and sent to EAIPS to process the payment and charge to the appropriate estate.  The monies due to Willis are recoverable as part of the official receiver’s expenses.