McHale & Co. Solicitors Blog

Third Parties (Rights against Insurers) Act 1930 vs 2010

The Acts, as the name suggests, give rights to third parties against insurers, where the insured has been subject to an insolvency event, such as liquidation or bankruptcy.  They, in effect, create a bridge between the third party and the insurer, over the, now defunct, insured.

The 1930 Act was borne out of the increased use of motor cars and therefore claims in respect of them where the guilty party had been declared bankrupt, the injured party having no claim against their insurer.  It also would apply in a business context; for example, where a contractor causes damage to a property and they go bust.

In order to bring a claim against an insurer, through the 1930 Act, the third party must actually establish liability, by way of judgment or settlement and not before.  If the insured was a company, it would be necessary to apply to restore them to the Companies Register.  In addition, it was unclear as to whether or not the rights arose in respect of breaches of contract, as well as negligence.  Further, as the third party would be stepping into the insured’s shoes, the insurer is entitled to apply its exclusions and limits per the insurance policy and schedule.  Difficulties with obtaining the insurance policy and schedule, to establish if any exclusions and limit would apply, also made it difficult for third parties to pursue claims under the Act.

The case law, eventually, developed to allow third parties to firstly apply to Court for a declaration as to whether or not any exclusions or limit did apply, before establishing the insured’s liability but, nevertheless, the position was more fraught with difficulties.

The 2010 Act, together with the Insurance Act 2015, has improved the position of third parties.  Of course, the 2010 Act only applies when the insured has been subject to an insolvency event.  However, there is now no need to restore the insured to the Companies Register, the third party acquires the right to pursue the insurer without having to establish liability against the insured and rights to disclosure from the insured are much improved.

Perhaps most importantly of all, is the effect of the Insurance Act 2015 which removes insurers previous right to deny cover on the basis of a breach of warranty or fundamental term of the insurance policy, regardless of whether or not it had any practical effect on claim.  

For more on the Insurance Act 2015, please see the blog of the same title.

If you have a claim which involves another parties insurers or the party has gone into liquidation or administration, please contact us on 0161 928 3848 or at mch@mchaleandco.co.uk, for a no obligation discussion.

 

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