Coming soon – Third Parties (Rights Against Insurers) Act 2010

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Posted in:Insolvency and Restructuring, Litigation|July 28, 2016 | Join the mailing list

The 1st August 2016 sees the coming into force of the Third Parties (Rights Against Insurers) Act 2010.  The 2010 Act will replace the Third Parties (Rights Against Insurers) Act 1930, and will hopefully make it easier for claimants who have claims against insolvent defendants to bring in the defendant’s insurer.

The 1930 Act

To put this in some context in order to be able to benefit from the 1930 Act a claimant (referred to as a third party in the 1930 Act) previously had to establish that the insured insolvent defendant owed a liability to them. This had to be established through either formal court proceedings (i.e. a formal judgment); arbitration proceedings or agreeing a settlement before they could seek to claim from the defendant’s insurer.

Such an approach lead to multiple sets of costly and uncertain applications to court, for instance, (i) because the defendant was insolvent there was usually the need to reinstate  the defendant to the companies register; and (ii) once this was done, proceedings would need to be issued and served and the claimant would be required to establish liability and loss.

Against this backdrop the claimant very often was suing a defendant who had no assets and was unaware whether the insolvent defendant had insurance.  Even if they were insured, it was usual for the insurance company to refuse to answer any questions about the level of indemnity or more fundamentally whether cover was in place.

New: The 2010 Act

The 2010 Act helpfully changes the position for a claimant who finds themselves in the unfortunate situation where the insured defendant is insolvent and the defendant’s insurer is refusing to confirm whether insurance is in place.

The main change introduced by the 2010 Act allows the claimant to issue proceedings directly against the Insurer. A claimant will also be able to resolve the liability of the defendant in those same proceedings (by asking for a declaration from the court on the issue of liability and loss).

Other advantages to the 2010 Act:

In terms of disclosure of information there are added burdens on the Insurer under the 2010 Act, for example when information is requested it must be supplied within 28 days. Failure to do so will allow the claimant to make an application to court for it and (more than likely) recover their costs for doing so.

The 2010 Act also allows a claimant to request information from not only the Insurer but also from individuals who were employees or officers of the Insured and/or insolvency practitioners once the defendant became insolvent.

It is also worth noting here that the 2010 Act is not retrospective. It will only apply if liability is incurred after the 1st August 2016.

Summary

Whilst the article above is somewhat of a whistle stop tour of the new 2010 Act it is clear that it will benefit claimants who have a good claim against an insured insolvent defendant but who previously had to fight hard to compel the defendant’s insurer to come to the negotiating table in order to resolve that claim.

To find out more about the issues raised in this post, or to discuss any queries regarding professional negligence, claims and insolvency, please get in touch with our Dispute Resolution team on help@berg.co.uk or call +44 (0) 161 829 2599.

The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by berg or any of its partners or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

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