14 December 2009
The Third Parties (Rights Against Insurers) Bill received its second reading before the House of Lords on 9 December. It represents a long awaited overhaul of the (arguably) out-dated Third Parties (Rights Against Insurers) Act 1930. The old Act was considered flawed, at least so far as claimants were concerned, in that it included the requirement for claimants to first establish a claim against the insolvent entity. Under the existing law, both the existence of the claim and the amount of the liability had to be established by legal action, arbitration or agreement. This required claimants to bring two actions, which increased the expense involved.
The new Bill provides that claimants should be able to sue the insolvent defendant's insurer directly without having to sue the wrongdoer first.
Under the Bill, claimants can bring a claim for a declaration against insurers as to the insured's liability to them. The rights of the insured under the policy are transferred to the claimant, who can fulfil the policy conditions (such as notification) as if they were standing in the insured's shoes. However, claimants are not required to comply with conditions requiring them to provide information or assistance to the insurer. They can serve a notice requiring the insurer to provide them with information regarding the policy, which has to be complied with within 28 days.
It is anticipated that the Bill should, once enacted, reduce time and costs because separate proceedings should no longer be necessary. Claimants will have a right to obtain insurance policy information more quickly in order to establish the likelihood of success. The Bill also removes the requirement for a dissolved insured company to be restored to the register of companies.
One notable provision is the abrogation of the requirement that the insured settle its liability to the third party before any indemnity is paid (this provision does not apply to marine insurance except in relation to death or injury claims).
It should be noted that save for notification requirements, an insured's compliance with policy conditions and common law requirements (for example, the duty of utmost good faith) remain and, as such, will still constitute defences to any third party claim.
Should you have any general queries in relation to this subject please do not hesitate to contact:
+44 (0)207 280 9146
+44 (0)151 600 8307