Alyssa Lane
The Third Parties (Rights against Insurers) Act 2010 came into force on 1 August 2016 and applies to cases where a company or individual has incurred a liability against which they are insured and/or has entered a state of insolvency. The Act allows a claimant to bring proceedings against an insurer directly and in one set of proceedings, removing the need for separate proceedings against the insolvent person. It also allows the third party to request information about the available insurance cover from another party, such as the insurer or insurance broker. The Act does not apply to reinsurance contracts.
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What You'll Learn
The Act applies to liabilities incurred before and after insolvency
The Third Parties (Rights against Insurers) Act 2010 (the "Act") came into force on 1 August 2016. It applies where, on or after this date, a company or individual has incurred a liability against which they are insured and/or has entered a state of insolvency and become a "relevant person".
The Act covers third-party liabilities incurred by the "relevant person" both before and after the insolvency event. For example, if a vehicle belonging to the insolvent was involved in an accident, and an insurance claim arising from the accident was unresolved at the date of the bankruptcy or winding-up order, the Act would apply.
The Act does not have retrospective effect, meaning the date on which the liability was incurred (e.g., the accident date) is irrelevant. Instead, the Act applies where the cause of action is complete, regardless of when the claimant's rights against the wrongdoer are crystallised.
Under the Act, the rights of the "relevant person" under the insurance contract against the insurer are transferred to the third party. The third party can bring proceedings directly against the insurer without first establishing the liability of the insured. The insured's liability to the third party and the insurer's liability under the insurance contract can be dealt with in the same set of proceedings.
The Act also allows the third party to request information about the available insurance cover from another party, such as the insurer or insurance broker. The third party must reasonably believe that the liability is covered by an insurance policy and that the insured's rights have been transferred to it under the Act.
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Third parties can request insurance information
The Third Parties (Rights against Insurers) Act 2010 came into force on 1 August 2016, replacing the Third Parties (Rights against Insurers) Act 1930. The 2010 Act introduces several changes to the previous legislation.
One significant change is that third parties can now bring proceedings directly against the insurer without first establishing the liability of the insured. This means that the insured's liability to the third party and the insurer's liability under the insurance contract can be addressed in a single set of proceedings.
Additionally, the 2010 Act allows third parties to request information about the available insurance cover from various parties, such as the insurer, insurance broker, officers or employees of the company, or liquidators or administrators. This request must be made in writing, and the third party must explain why they believe they are entitled to the information.
The type of information that can be requested includes:
- Whether there is insurance covering the liability.
- The identity of the insurer.
- Whether the insurer has denied liability under the policy.
- Details of any proceedings between the insured and the insurer.
- Whether the limit of indemnity has been affected by other claims.
- Whether there is a fixed charge to which sums paid by the insurer would be liable.
The Act also addresses situations where an insured individual is deceased but did not die insolvent, or where there are policy indemnity issues. In such cases, claimants may seek to sue the insurer, even if there is no direct cause of action. However, unless the insured is insolvent and the Act applies, this approach should be resisted.
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Third parties can bring proceedings directly against the insurer
The Third Parties (Rights against Insurers) Act 2010 came into force on 1 August 2016, replacing the Third Parties (Rights against Insurers) Act 1930. The 2010 Act introduces several changes to the previous regime, including the ability of third parties to bring proceedings directly against the insurer.
Under the 2010 Act, third parties can bring proceedings against the insurer without first establishing the liability of the insured. This means that the insured's liability to the third party and the insurer's liability under the insurance contract can be addressed in a single set of proceedings. The third party can bring a claim against the insurer for a declaration that the insured is liable to the third party, and the court may give judgment against the insurer for a specified amount.
The Act allows the third party to request information about the insurance cover from another party, such as the insurer or insurance broker, if they reasonably believe that the liability is covered by an insurance policy and that the insured's rights have been transferred to them under the Act. This includes requesting information on whether there is insurance covering the liability, the identity of the insurer, whether the insurer has denied liability, and whether there have been proceedings between the insured and the insurer.
The Act also addresses situations where an insured is facing financial difficulties and enters into alternatives to insolvency, such as voluntary procedures with creditors. In such cases, the Act provides for rights to be transferred to the third party.
It is important to note that the Act does not apply to reinsurance contracts and is not retrospective. It only applies if the relevant person became insolvent on or after 1 August 2016. Additionally, the Act does not affect the entitlement of the third party beyond the proceeds of the insurance policy in relation to the liability in issue.
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The Act does not apply to reinsurance contracts
The Third Parties (Rights against Insurers) Act 2010 applies where, on or after 1 August 2016, a company or individual had incurred a liability against which they were insured and/or had entered a state of insolvency and become a 'relevant person'. The Act does not, however, apply to reinsurance contracts.
The 2010 Act replaced the Third Parties (Rights against Insurers) Act 1930, modernising and simplifying the previous legislation. The 2010 Act makes a number of changes to the regime under the 1930 Act. If an insured under a liability policy is or becomes insolvent and the insured incurs a liability that is covered by the insurance, the rights of the insured against the insurer are transferred to the third party claimant. This reflects the position under the 1930 Act.
Under the 2010 Act, the third party can bring proceedings directly against the insurer without first having established the liability of the insured. The insured’s liability to the third party and the insurer’s liability under the insurance contract can be dealt with in the same set of proceedings. The third party can bring proceedings against the insurer for either or both of: a declaration that the insured is liable to the third party, and/or a declaration that the insurer is liable under the insurance contract.
The third party can also request information about the available insurance cover from another party (such as the insurer or insurance broker) if the third party reasonably believes that the liability is covered by an insurance policy and that the insured’s rights have been transferred to it under the Act. The third party can request the following information: whether there is insurance that covers the supposed liability (or might reasonably be regarded as covering it), who the insurer is, whether the insured has been informed that the insurer denies liability under the policy, whether there are or have been proceedings between the insured and insurer (and relevant details), whether the limit of indemnity has been eroded by other claims, and whether there is a fixed charge to which sums paid by the insurer would be liable. A request for information must be made in writing and say why the party making the request believes it is entitled to the information.
The 2010 Act removes the need to restore companies to the register of companies. One reason for restoring a company to the register was to obtain information from it. The 2010 Act allows the third party to request the information directly from persons related to the company, such as officers or employees or the liquidators or administrators of the company.
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The Act does not have retrospective effect
The Third Parties (Rights against Insurers) Act 2010 came into force on 1 August 2016. It applies to cases where a company or individual incurred a liability against which they were insured and/or became insolvent on or after this date.
The Act allows a claimant to bring proceedings against an insurer directly and in one set of proceedings if the insured is in a specified form of insolvency (including liquidation, administration, or dissolution). This removes the need for preliminary proceedings against the insured. The third party can bring proceedings against the insurer for a declaration that the insured is liable to the third party, and the insurer's liability under the insurance contract can be dealt with in the same set of proceedings.
The Act also imposes a duty on the insolvent, the insolvent's personal representative (in the case of a deceased debtor), or the company, to provide information that the third party may reasonably require to ascertain whether any rights have been transferred to them under the Act and to enforce those rights. This includes allowing the inspection and copying of relevant documents, such as contracts of insurance and receipts for premiums.
The Act further addresses the issue of its application in cases with a cross-border element. It extends to the United Kingdom, with the exception of section 2 and paragraphs 3 and 4 of Schedule 1, which do not extend to Scotland, and section 3, which extends only to Scotland.
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Frequently asked questions
The Third Parties Rights against Insurers Act 2010 came into force on 1 August 2016.
The Act makes a number of changes to the previous Third Parties Rights against Insurers Act 1930. The 2010 Act allows a third party to bring proceedings directly against the insurer without first having established the liability of the insured. It also removes the need to restore companies to the register of companies.
The Act applies when a company or individual has incurred a liability against which they are insured and/or has entered a state of insolvency and become a 'relevant person'. The Act does not have retrospective effect and only applies where the relevant person became insolvent on or after 1 August 2016.
