A little used statute, which has sat on the shelf since 1930, has finally been taken down and dusted.
The Third Parties (Rights Against Insurers) Act 1930 gave the Claimant the right to bring a claim direct against insurers where the insured Defendant had become insolvent. A major advantage of the Act was that insurance proceeds could be paid in full, direct to the Claimant, and did not form part of the insolvency assets for distribution to all creditors.
But a Claimant faced difficulties which made the Act less attractive. The main ones were:
The Third Party (Rights Against Insurers) Act 2010 aims to overcome these and other difficulties and, given that the Act has gone from 5 sections to 21 sections plus 4 schedules, one might hope it has.The new Act provides:
An insurance company is still entitled to rely on any defence, counterclaim or set-off it would have had against the insured, or on behalf of the insured, for example, for unpaid premium or for contributory negligence by the Claimant. But insurers cannot rely on any clause in the policy which requires the insured to pay first before insurers have to reimburse. Nor can they rely on the expiration of the primary limitation period because the time for bringing an action against insurers commences from when the liability of the insured Defendant is established. Finally, an insurance policy cannot contract out of the Act.The Act now specifically extends to arbitration as well as court proceedings, claims or insurance companies based outside the UK, and includes estates which are insolvent as well as insolvent companies and individuals.So much for the good news. Unfortunately, the Act is not yet in force, despite being passed last year. The Department for Business, Innovation and Skills (BIS) is reviewing this as part of a review of legislation inherited from the Labour Government.Watch this space!
Meanwhile, in these days of an increasing number of insolvencies, at least take whatever advantage is possible from the 1930 Act which remains in force.
Frances Alderson, partner, Fladgate LLP (firstname.lastname@example.org)