A trio of Acts stem from the Law Commission’s work to reform insurance contract law. The two very familiar ones are CIDRA – The Consumer Insurance (Disclosure and Representations) Act 2012 – and the Insurance Act 2015. Our RED campaign has provided a great deal of material and insight about the latter. The third is the Third Party (Rights Against Insurers) Act 2010. It has not yet been brought into force despite securing Royal Assent in 25 March 2010 (i.e. in the last weeks of Gordon Brown’s premiership). However, new regulations have finally emerged to take matters forward.
More than 2,000 days after Royal Assent, the regulations required to implement the Act have finally been laid before Parliament. Unsurprisingly, these are entitled the Third Parties (Rights Against Insurers) Regulations 2016. They explain rather dryly that “the 2010 Act transfers the rights of the relevant person under the insurance contract to the person to whom the liability is incurred, thus enabling the latter to enforce those rights directly against the insurer, rather than the proceeds of the insurance policy being treated as the assets of the insured for distribution to creditors in the insolvency.”
What that actually means is that an negligently injured claimant, or someone suffering negligent property damage or financial losses, will be able to sue a liability insurer directly if the negligent policyholder is insolvent. There will no longer be a need for the cost and delay of two claims: first against the policyholder in a primary civil claim and second against the insurer so as to access policy coverage that would fund any damages. This streamlined approach could be especially beneficial in mesothelioma claims which can often lie against long-since defunct or insolvent businesses, as the Commons Justice Committee pointed out in a report in August 2014 (Mesothelioma Claims, HC 208). It noted that (the emphasis is from the original):
A rare issue on which there appeared to be widespread agreement amongst our witnesses was the desirability of bringing into force the Third Party (Rights Against Insurers) Act 2010. This would enable a claim to be issued against an insurer without a judgment first having had to be obtained against an insolvent insured party. In his 2 July 2014 letter Lord Faulks referred us to the Written Statement made in April 2013 by the then Minister Helen Grant MP to the effect that the scope of the Act had to be extended by further primary legislation to include certain insolvency situations before it could be brought into force … We recommend that progress on drawing up this legislation be expedited with a view to its inclusion by means of amendment in a suitable Government bill this Session.
Despite this firm recommendation, nothing was expedited and we – and more importantly, those with claims that might benefit from the new approach – have had to wait more than a year and a half for signs of progress. But things are at last moving and the new regulations were laid before Parliament on 25 February 2016. Subject to their approval by both chambers, and to any observations from the Joint Committee on Statutory Instruments, the 2010 Act will come finally into force*, very probably in sequence with the commencement of the Insurance Act 2015. In a written statement to Parliament on 25 February about the draft regulations, Justice Minister Lord Faulks said he “will announce the commencement date of the Third Parties (Rights Against Insurers) Act 2010 (“the 2010 Act”) as amended by both the Insurance Act 2015 and the regulations in due course but the date will not be earlier than three months after the regulations have been made.” This timetable would take matters well into the second quarter of the year.
Ironically, any unissued civil claims around when the Act was going through Parliament in 2010 that might have benefitted from its provisions will long-since have been barred by the expiry of both three and six year limitation periods.
* The precise commencement mechanism for the 2010 Act is set out in a complex series of cross-references between the new regulations and the 2010 and 2015 Acts, which will require some further analysis.
About the Author
Alistair Kinley is BLM’s Director of Policy & Government Affairs.
Alistair is responsible for BLM’s engagement with government departments and regulators on policy and public affairs issues and consultations affecting the firm and its customers. He coordinated BLM’s market-facing activities in connection with the Insurance Act 2015 and the consultations which preceded its publication and introduction in Parliament.
He is a member of the Civil Justice Council (CJC), a regular speaker and experienced commentator on legal and procedural reforms and was a contributing editor to the Law Society’s Litigation Funding Handbook (September 2014).