Law Society loses case against RBM
The High Court in Blantyre has dismissed a Malawi Law Society (MLS) application for a judicial review of a Reserve Bank of Malawi (RBM) directive that compels insurance companies to pay directly to claimants.
In his judgement, High Court of Malawi judge Healey Potani refused to agree with MLS that the directives were inconsistent with the Legal Education and Legal Practitioners (LELP) Act.
“In the end result, the court is not convinced that [RBM] acted [beyond its powers] and unreasonably in issuing the directives/decisions complained of herein as to entitle the [MLS] the judicial review remedies sought. The [MLS] case is accordingly dismissed in its entirety,” ordered the judge, asking all parties to foot their own costs for the proceedings.
Lead lawyer for MLS, Patrick Mpaka, confirmed in an interview yesterday that his team received instructions from the lawyers’ body to appeal and were almost done by yesterday afternoon with paperwork.
MLS challenged the RBM directive initiated against a background of suspected deception when lawyers or claim settling agents were required to receive claims from insurance firms and channel them to the claimants.
Insurance Association of Malawi joined the matter as an interested party, and through the affidavit signed by the association’s president Dorothy Chapeyama, they supported the RBM directive.
Before the RBM directive, issued around August 15 2014, financial institutions, including insurance firms, were paying claimants through legal firms that were representing them or claim settling agents.
This arrangement left the legal companies or any claim settling agent with a duty to subtract their fees from the amount paid and remit what was due to the claimants.
But RBM, in its capacity as the registrar of financial institutions, issued the directive, effectively requiring insurance companies to start drawing two cheques, one directly to a claimant and another to a legal firm or any other claim settling agent for their fees.
The RBM further directed that legal practitioners or any claim settling agent must start submitting to the central bank a letter of appointment, signed by the claimant, before commencement of a claim.
The lawyers, through their professional body, protested the directives, arguing RBM acted beyond its powers and unreasonably as its decisions have the effect of regulating lawyer-client relationship in insurance claims.
The lawyers’ body wanted the directive declared null and void.
But during the hearing of the application, the RBM said the decisions were made following complaints from claimants that they were not being paid by lawyers or were being underpaid.
The claimants, according to RBM, also complained that more than one lawyer or claim settling agent were claiming on behalf of one claimant or acting without instructions from the claimants, hence the issue of the submission of the appointment letter to RBM came about.
During the hearing, MLS argued that the RBM’s directive allowed the central bank to exercise powers and functions otherwise exercisable by MLS and the High Court over the Society’s members in a manner contracting the dictates and spirit of the LELP Act, as well as the Rules, Regulations and Codes thereunder.
The directive is meant to apply to insurers, insurance brokers and claim settling agents licensed under the Financial Services Act and any other person providing insurance claims management services.
But RBM and the Insurance Association of Malawi, as an interested party, had argued that the central bank has clear statutory powers under Section 34 of the Financial Services Act and Section 79[3] of the Insurance Act to issue directives pertaining to financial services and industries.
