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Third Parties (Rights against Insurers) Act 2010

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. The Lord Chancellor confirmed in his report on the implementation of Law Commission proposals in May last year, that the 2010 Act's commencement has been pushed back further to allow amendment to include (a) a number of specific insolvency situations and (b) a power for the Secretary of State to add further insolvency situations to the 2010 Act by order should the need arise.

The Lord Chancellor has stated that: "The Government is continuing to work closely with the Commission on these proposals and intends to bring the 2010 Act into force as soon as reasonably possible after the necessary amendments have been made".

It is now hoped that the 2010 Act will be brought into force in the autumn this year (2015).

This leaves third parties still having to pursue claims under the Third Parties (Rights against Insurers) Act 1930 (the "1930 Act"), which requires the third party to first establish liability of the insured either in Court, or in arbitral proceedings, or an enforceable agreement.

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. 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 insured company to the register of companies, by allowing the third party to bring proceedings directly against insurers.

 

This note contains general guidance only on English Law as at January 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.

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