Overview

The Third Parties (Rights against Insurers) Act 2010 clarifies and strengthens the rights of individuals and businesses (third parties) to claim directly from an insurer when the person originally responsible for the liability (the insured) is insolvent or bankrupt. This avoids the complexities and delays of pursuing a claim against the potentially bankrupt insured first.

Description

This Act allows third parties to claim directly from the insurer of an insolvent insured party. The act defines who constitutes an "insured" and a "relevant person" facing insolvency proceedings.

Establishing Liability:

The Act sets out the legal processes (declarations in England & Wales and Northern Ireland; declarators in Scotland) for a third party to establish the insured's liability, even before a judgment against the insured is obtained. It permits the third party to sue the insurer and the insured simultaneously.

Relevant Persons:

The Act specifies various situations where a person or entity is considered a "relevant person" and therefore eligible for this direct claim process. These include individuals and corporate bodies facing bankruptcy, administration, liquidation, or similar insolvency procedures. Specific legislation from England and Wales, Scotland, and Northern Ireland is referenced in defining relevant insolvency statuses.

Transferred Rights:

The act details how the insured's rights under the insurance policy are transferred to the third party to pursue. It establishes limits on the transferred rights (limiting the claim to the insured's liability), and conditions under which the transferred rights hold, including some exceptions relating to the provision of information by the insured party.

Other Provisions:

The Act also covers areas such as the insurer's right of offset (if the insured owes the insurer money), provisions for information disclosure, jurisdictional issues (where the claim can be filed within the UK), the effect of the transfer on the insured's remaining liability, and the inapplicability to reinsurance.

Government Spending

The Act doesn't directly involve government spending. The impact is indirect, potentially reducing the burden on the courts and government insolvency processes through faster resolution of claims. There are no figures available on the potential impact on government expenditure.

Groups Affected

• Third parties: Individuals and businesses injured or harmed by the actions of others can claim directly from the insurer, avoiding delays associated with pursuing insolvent individuals or companies.
• Insurers: Insurers face a direct claim from third parties instead of claims only from insured parties.
• Insolvent individuals and companies: The Act affects their liability, potentially shifting some of the responsibility to their insurers.
• Lawyers and courts: The Act may affect the number of cases handled by the legal system.

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