Insurance policies, particularly commercial policies providing business interruption, may contain provisions dealing with the consequences which flow for the parties, and the question of continuing cover and any indemnity, in the event of the liquidation of an insured.
The relevant clauses are often outdated and should be reviewed having regard to the relevant provisions of the Companies Act 2008 dealing with both with liquidation and business rescue.
It should not be forgotten that section 131(6) of the Companies Act provides for the suspension of liquidation proceedings at the time that a business rescue application is made.
In this recent judgment the court held that in that context a business rescue application is made when the relevant application is issued, served by the Sheriff on the company and the Commission and each affected person is notified of the application in the prescribed manner. It is only then that the requirements for triggering the suspension of the liquidation proceedings are met. Liquidation clauses in policies will also have to take account of the effect of such a suspension, and the consequences of business interruption, on the insurance.