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Third Party (Rights Against Insurers) Act 2010

The 2010 Act received royal assent on the 25 March 2010 and aims to address some of the problems under the old 1930 Act.  The Government is currently working to identify what needs to be done to bring the 2010 Act into force and will make an announcement shortly as to when it will commence.  Until the 2010 Act is brought in to force insurers should continue to deal with claims under the old 1930 Act.

The main changes under the 2010 Act are:

1. A claimant can bring proceedings against an insurer of an insolvent or deceased insured without having first to obtain a judgment against that insured.
2. If an insured is insolvent or deceased and the claimant reasonably believes they may have had insurance, then they can request that an insurer or other such person (most probably a broker) provide the information and documents required.  If this is not provided within 28 days the claimant can issue an application compelling disclosure.An insurer can still defend the claimant’s claim under the 2010 Act by disputing policy indemnity.  However, the 2010 Act prevents an insurer from disputing policy indemnity where:

• The claimant has taken steps which if done by the insured would have fulfilled the condition relied upon by the insurer, such as notification of the claim; or
• The insured has failed to comply with the condition relied upon (except notification) by reason of their insolvency or death.

Other matters which are relevant under the 2010 Act are:

• The 2010 Act will apply to an incident which occurred before it comes into force as long as the claimant has not obtained a judgment against the insolvent or deceased insured. 
• The liability insurer can offset against the claimant’s claim any sums due under the insurance, such as unpaid premiums.
• If the claimant commences proceedings against the liability insurer under the 2010 Act, the liability insurer can still raise issues regarding their insured’s liability in defence of the claim.

In summary, the 2010 Act will make it less costly for claimants to bring claims against the liability insurer of an insolvent or deceased insured.  The 2010 Act also limits policy indemnity defences available to the liability insurer. 

From a practical point of view liability insurers need to be more careful and selective as to the reasons policy indemnity is declined when issuing a final decision and should not assume that claims have simply gone away.

There is a strong possibility that claimants may be holding back on claims where the insured is insolvent or deceased until the 2010 Act comes into force.  Therefore consideration should be given now to issuing a final decision on these claims which provide a defence under the 2010 Act and/or completing outstanding indemnity/liability enquiries.