The Third Party (Rights Against Insurers) Act 2010 (the 2010 Act) has sat on the statute book without coming into force for over five years since receiving Royal Assent. The delay was caused by the need to update the 2010 Act to reflect developments in insolvency law since the Act first passed into law. The relevant changes have now been made under the Third Parties (Rights against Insurers) Regulations 2016. The 2010 Act will now finally come into force on 1 August 2016.

The 2010 Act updates the Third Parties (Rights Against Insurers) Act 1930 which seeks to protect the rights of third party claimants against insurers of the liabilities of insolvent defendants. Both the 1930 and the 2010 Act enable compensation payments from insurers of wrongdoers to be paid to a claimant rather than form part of the assets available to the insolvent wrongdoer’s creditors. Any rights the insolvent policyholder has against the insurer are transferred (by statutory transfer under the 2010 Act) to the victim. The 2010 Act enables this transfer to happen without the need for the victim to first establish the liability of the policyholder.

The 2010 Act defines wrongdoers by listing the circumstances in which the insured is a “relevant person”. Included are all the main forms of insolvency and some additional circumstances. Without being listed a circumstance will not enable the transfer of rights under the 2010 Act. Unfortunately the 2010 Act as first drafted did not sufficiently cover the range of possible administrations under the Insolvency Act 1986 and did not adequately reflect more recent developments in insolvency law.

View: The Third Parties (Rights against Insurers) Act 2010 (Commencement) Order 2016;