The Third Party (Rights Against Insurers) Act 2010 (the 2010 Act) has sat on the statute book without coming into force for over four years since it received Royal Assent. Now the Insurance Bill 2014 which primarily updates insurance contract law is being used to make the changes needed for the 2010 Act to be brought into force.
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 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. The Insurance Bill therefore addresses these gaps by providing the means by which future developments in administration can be covered without the need to keep amending primary legislation.
View Insurance Bill (HL Bill 39), 24 July 2014
View Third Parties (Rights against Insurers) Act 2010, 24 July 2014