1. 29th October 2018 Tamara Goriely – Automated Vehicles
16th October 2018 Rob Merkin – Annual Update

2. Third Parties (Rights against Insurers) Legislation
Peter MacDonald Eggers QC

3. Introduction
The Third Parties (Rights against Insurers) Act 2010 passed on 25 March 2010
Act gives effect to Law Commission Report No. 272
Amended by Insurance Act 2015
Sect
Sched. 3
The 2010 Act entered into force on 1 August 2016
Subject to saving, the 1930 Act is repealed
The 2010 Act and the 1930 Act do not run in parallel
Redman v Zurich (2017)
Validity: R (Roadpeace) v Secretary of State (2017)

4. Background to the 2010 Act Common law
Third Parties (Rights against Insurers) Act 1930
Road Traffic Acts
Contracts (Rights of Third Parties) Act 1999

5. Common law Privity Agency: disclosed and undisclosed principals Trust
Assignment
Persons with a limited interest insuring whole interest:
Obligation to account:
Tomlinson v Hepburn (1966)
DG Finance v Scott (1999)

6. The 1930 Act
Third party has right of direct recourse against insurer if:
The insured’s liability to the third party has been established
Bradley v Eagle Star (1989)
The insured is insolvent
The insured was insured against the liability to third party
The insurer is able to rely on defences available as against the insured:
McCormick v National Motor (1934)
The Fanti (1991)

7. The 1930 Act
Applies to liability insurance (not pecuniary loss insurance):
Tarbuck v Avon (2000)
Re OT Computers (2004)
Centre Re v Freakley (2005)
American School of Dubai v Beazley (2018):
Claim by primary insurers against excess insurers under 1930 Act for overpaid Defence Costs recoverable from the insured
Claim by third party claimant against excess insurers under 1930 Act for sum set-off by primary insurers for overpaid Defence Costs recoverable from the insured

8. The 1930 Act
No settlement between insurer and insured after liability incurred and after insolvency is effective: sect. 3
Information as to the insurance can be sought from the insured, its representatives or the insurer prior to establishment of liability:
Re OT Computers (in administration) (2004)
Not apply to reinsurance: sect. 1(5)

9. The 1930 Act: established liability
Existence and amount of liability ascertained by judgment, award or settlement:
Post Office v Norwich Union (1967)
Bradley v Eagle Star (1989)
Proceedings permitted under 1930 Act only in the event of such establishment
Subject to Court’s permission: Wood v Perfection (1996)

10. The Road Traffic Acts Road Traffic Act 1930
Current statute: Road Traffic Act 1988
Third party has right of direct recourse against insurer if:
The insured is required to be insured against liability for death, injury or property damage caused by or arising out of use of motor vehicle: sect. 145
Judgment is obtained against the insured in respect of such liability: sect. 151
The insured is insured against that liability: sect. 151
Terms restricting cover by reference to the driver or the vehicle are of no effect: sect. 148(1)-(2)
Condition in policy restricting or excluding cover in respect of an act or omission after event giving rise to claim ineffective: sect. 148(5)
Restricts insurers’ reliance on avoidance by time limits: sect. 152
Note: Automated and Electric Vehicles Act 2018, sect. 2

11. Contracts (Rights of Third Parties) Act 1999
Third party may enforce certain contractual terms if:
The contract so provides, or
The contractual term purports to confer a benefit on the third party
This must be the parties’ intention, not a mere consequence
Subject to the contracting parties’ contrary agreement
Implications for insurance:
Loss payees
Non-insured beneficiaries
Liability policies?

12. The 2010 Act Topics: Transfer of rights to the third party claimant
Set-off
Conditions in the policy
Proceedings against the insurer
Right to information

13. The 2010 Act: Transfer of rights
Sect. 1(2): The insured’s rights transferred to third party if:
The insured is liable to the third party
The insured is insolvent:
Individuals: sect. 4-5
Companies: sect. 6
The liability is incurred or the insolvency arises on or after the Act’s commencement (1 August 2016): sect. 20 and Sched. 3
Subject to regulations made under the amended sect. 19
Redman v Zurich (2017)
Otherwise, the 1930 Act applies
It does not matter if the liability is incurred before or after the insolvency: sect. 1(1)

14. The 2010 Act: Transfer of rights
The 2010 Act applies to voluntarily-incurred liabilities: sect. 16
Re OT Computers (2004)
Cf. Tarbuck v Avon (2000)
The rights are transferred only up to limits of the insurance: sect. 8
The insured’s liability in respect of which rights are transferred cannot be enforced against the insured: sect. 14
Subject to insurer’s insolvency: sect. 14(6)

15. The 2010 Act: Set-off
The insurer has rights of set off with respect to insured’s liability: sect. 10
Murray v Legal & General (1970)
Cox v Bankside (1994)
Zurich v International Energy Group (2015)
Denso Manufacturing v Great Lakes (2017)
American School of Dubai v Beazley (2018)
The Act does not apply to reinsurance: sect. 15
The transfer does not depend on a connection with the jurisdiction: sect. 18

16. The 2010 Act: Conditions in the policy
Conditions in policy can be performed by third party: sect. 9(2)
Transfer is not subject to a condition requiring information and assistance if that condition cannot be fulfilled because the insured is an individual who has died or a body corporate that has been dissolved: sect. 9(3)
Sect. 9(4): such conditions do not include claims notification provisions

17. The 2010 Act: Conditions in the policy
Transfer is not subject to a condition requiring prior discharge by the insured: sect. 9(5)
So pay to be paid conditions not enforceable
In marine insurance, this is relevant only if liability is for death or personal injury: sect. 9(6)
Cf. The Fanti and Padre Island (1991)
Terms terminating policy on insolvency are ineffective: sect. 17
Terms terminating policy on provision of information pursuant to Act are ineffective: Sched. 1, para. 5

18. The 2010 Act: Proceedings against insurer
Sect. 2(2)-(3): Third party may bring proceedings against insurer for:
Declaration as to insured’s liability to third party
Insured can be joined as a defendant: sect. 2(9)
Declaration as to insurer’s potential liability to third party
Meaning insurer’s liability in respect of insured’s liability to third party, if established: sect. 2(11)
Subject to insurer’s defences: sect. 2(3)
Sect. 2(7): a declaration as to insured’s liability can also be sought in arbitration
Proceedings may be brought against insurer if the insured asserts that it has rights against the insurer, even if the existence of the insurance contract or cover under that contract is not yet proved:
BAE Systems Pension Funds v RSA (2017)

19. The 2010 Act: Proceedings against insurer
Proceedings may be brought against insurer before insured’s liability is established: sect. 1(3)
However, the third party cannot enforce rights unless liability is established
Sect. 1(4): “established” means existence and amount of liability is established by:
Declaration under sect. 2
Judgment or decree
Arbitration award
Enforceable Agreement

20. The 2010 Act: Proceedings against insurer
The Court will grant the declaration if such liability or potential liability is proved: sect. 2(3)
However, insurer can rely on any defence available to insured: sect. 2(4)
Insurer can rely on time bar defence available to insured, but not if (i) action against insured is in progress and (ii) insured cannot rely on time bar defence: sect. 2(5) and sect. 12

21. The 2010 Act: Proceedings against insurer
If declaration is made so that insurer is liable to third party, then judgment may be given against insurer: sect. 2(6)
Judgment against insurer is binding on insured, only if the insured is a party to the proceedings: sect. 2(10)

22. The 2010 Act: Right to Information
Sect. 11 and Schedule 1
The right to information is in addition to other rights: para. 6
Peel Port Shareholder v Dornoch (2017)
Para. 1: The third party may request information from:
The insured, if third party reasonably believes insured is insolvent and has incurred liability to third party: para. 1(1)
Another person, if third party reasonably believes a liability has been incurred, the insured has benefit of insurance, rights are transferred and the other person can provide the information: para. 1(2)

23. The 2010 Act: Right to information
The information requested must relate to the existence and details of the insurance contract, whether claim notified or whether proceedings on foot between insured and insurer: para. 1(3)
The request must be made by notice in writing: para. 1(1)-(2)
The notice must include particulars of the facts giving rise to the entitlement to the information: para. 1(6)
The information may be requested before the insured’s liability is established:
Re OT Computers (2004)
Peel Port Shareholder v Dornoch (2017)

24. The 2010 Act: Right to information
Para. 2: The recipient of notice must respond within 28 days with:
Information, or
Reasons for not being able to provide the information, or
(If the recipient no longer has control of relevant document) details of the information and identity of person who has control
In the event of failure to provide the information, the Court can order its provision: para. 2(3)
Subject to privilege: para. 2(4)
Notices to officers or insolvency practitioners with respect to defunct companies: para. 3 and 4

25. The 2010 Act: Key changes Proceedings against the insurer
No need to restore defunct insured
Certain insurance conditions are ineffective
Confirms insurer’s right of set off
Enlargement of information rights

26. The 2010 Act: Key changes The 2010 Act does not expressly address:
If insolvency is revoked or discharged
Law Society v Shah (2007)
Compromises between insurer and insured
Continuing rights of insured if settles with third party:
Centre Re v Freakley (2005)
Cf. section 5 of the Workers’ Compensation Act 1906:
In Re Pethick, Dix & Co (1915)
In Re Renishaw Iron Company Ltd (1917)

27. 7 King’s Bench Walk, Temple, London EC4Y 7DS
7 King’s Bench Walk, Temple, London EC4Y 7DS

28. 29th October 2018 Tamara Goriely – Automated Vehicles
16th October 2018 Rob Merkin – Annual Update