Third Parties (Rights against Insurers) Act 2010
Tuesday, 13th October 2015
After receiving Royal Assent on 25 March 2010, the Third Parties (Rights Against Insurers) Act 2010 (the "2010 Act") is still not yet in force, as it does not cover all relevant insolvency procedures and defunct organisations and requires amendment. Further, the 2010 Act was not drafted in such a way as to keep pace with the law so that new developments could be easily accommodated. However, the Insurance Act 2015 (which received Royal Assent on 12 February 2015 and is due to substantively come into force in August 2016) corrects the defects in the 2010 Act, and it is now hoped that the 2010 Act will be brought into force before the end of 2015.
One of the main benefits of the 2010 Act is that it will, when in force, allow a creditor with a claim against an insolvent company or individual to proceed against the insolvent's insurer directly without first having to establish the liability of the insured, as is currently required under the Third Parties (Rights against Insurers) Act 1930 (the "1930 Act") . The insured's liability will have to be established before those rights against the insurer can actually be enforced, but it will be possible to achieve this by a declaration of the Court, as well as by judgment, settlement or arbitration award.
This means that the third party will only have to issue one set of proceedings against the insurer (and, optionally, the insured), asking the Court to make declarations both as to the insured's liability to the third party and the insurer's liability under the policy.
Essentially, the 2010 Act will, when implemented, therefore remove the need for multiple sets of proceedings by allowing the third party to resolve all issues relating to its claim against the insurer within those proceedings.
Another pitfall of the 1930 Act is that if the insured company has been dissolved, the third party also has to apply to the Court to restore the company to the register before commencing an action against it. The 2010 Act will remove the need for third parties to undertake the step of restoring the dissolved insured company to the register of companies, by allowing the third party to bring proceedings directly against its insurers.
This note contains general guidance only on English Law as at October 2015 and does not contain legal advice. You should take legal advice on the circumstances of your own case. If we can be of assistance in that regard please let us know. Ashfords LLP is regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.