AIG insured Ageas against breach of warranty in 2010 Kwik-Fit acquisition
Ageas UK has won a legal battle against car repair firm Kwik-Fit (GB), triggering a £12.6m pay-out from its warranty insurer, AIG Europe.
AIG insured Ageas against breach of warranty in its £214.8m purchase of Kwik-Fit Insurance Services from parent Kwik-Fit (GB).
Two years after the sale in 2012, Ageas sued Kwik-Fit (GB) arguing that an accounting error had led it to pay £17.6m too much for the private motor broking business.
In the sales agreement, Kwik-Fit (GB) warranted that the Kwik-Fit Insurance Services accounts Ageas had relied on to value the company were true, fair, accurate and complied with the relevant accounting standards.
But on Friday at the High Court, Justice Popplewell sided with Ageas and said: “As is now common ground, KFGB breached those warranties.”
The contracts at time of sale capped Kwik-Fit (GB) liability at £5m for any loss of under breach of warranty.
The insurance from AIG protected Ageas for losses above the £5m cap.
AIG argued that Ageas’s total warranty claim was £8.8m, resulting in an insurance payout of £3.8m.
But Ageas contended its total claim was £17.6m, requiring a payout under the policy of £12.6m.
The High Court case centred on how Kwik-Fit Insurance Services had accounted for bad debts arising from customers being covered for a period that they had not paid the premium for.
Ageas argued that the debts were understated, leading to an overstatement of Kwik-Fit Insurance Services’ revenue and assets.
An Ageas spokesman said: “Ageas can confirm that its application to the High Court regarding a warranty breach related to an accounting liability during its purchase of Kwik-Fit Insurance Services Limited has been successful.
“We are pleased that the judgement reinforced both the strength of the case and the level of compensation.”
A spokeswoman for AIG said: “AIG never comments on specific claims.”