Will Supreme Court ruling affect businesses offering 'repair and replace' warranties?

The Financial Services Authority (FSA) — now replaced by the FCA — took action against Digital Satellite Warranty Cover Ltd to wind it up ‘in the public interest’. It was said that the company was carrying on a regulated activity — specifically that its ‘repair and replace’ warranties were tantamount to contracts of insurance — without FSA authority. The FSA said this was in breach of the Financial Services and Markets’ Act 2000 (FSMA 2000).

Digital sold and offered extended warranty contracts for periodic payments, under which they contracted to repair or replace satellite television dishes, satellite boxes and other equipment. The FSA argued that these were contracts of insurance within the meaning of Schedule I, Part I (Regulated Activities) Order 2001 (specifically Class 16 being the most relevant i.e. ‘miscellaneous financial loss’). The FSA argued that Digital was not authorised to carry on any kind of insurance business. Digital said its contracts were not insurance and did not require FSA authorisation to carry on a regulated activity. The court at first instance rejected their arguments, granting the FSA an order that Digital be wound up…

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