Commentary on Sections Section 8: Limit on rights transferred
41.This section ensures that a third party does not receive a right to recover from the insurer any amounts in excess of the insured’s liability. The rights of the insured against the insurer are preserved in respect of any amount that is due under the insurance policy but not payable to the third party. An example is where the insurer is obliged by the policy not only to indemnify the insured in full but also to reimburse the insured for costs incurred in mounting a defence to a third party’s claim or in seeking advice on whether a third party’s claim is likely to be successful. These costs would, by virtue of section 8, be payable under the policy but not recoverable by the third party (the insured would retain the right to claim them).