Summary Amendments to the Third Parties (Rights against Insurers) Act 2010
23.The policy of the 2010 Act, like that of the 1930 Acts which it will repeal, is to enable payments of compensation by insurers of relevant wrongdoers to go to the victim rather than forming part of the assets available to the general creditors of the wrongdoer. This is achieved by a statutory transfer: the rights the policyholder has against the insurer are transferred to the victim. This enables the victim to recover direct from the insurer the insurance monies that would have been paid to the policyholder in respect of the victim’s claim. Unlike the 1930 Acts, however, the 2010 Act does this without the victim having first to establish the liability of the policyholder, whether by legal proceedings or otherwise. The victim is the third party referred to in the title of the 1930 Acts and the 2010 Act.
24.There is no single term that can completely describe the circumstances in which a person should be subject to the 1930 Acts or the 2010 Act but the Commissions, in their joint 2001 Report, broadly endorsed the view of Bingham LJ that:
“The legislative intention was, I think, that ... the provisions of the 1930 Act should apply upon an insured losing the effective power to enforce its own rights and dispose of its own assets.”(1)
25.The 1930 Acts and the 2010 Act each define the insured wrongdoers to whom they are to apply. The 2010 Act does so by listing in sections 4 to 7 the circumstances in which the insured wrongdoer is a “relevant person”. These circumstances are of various types but they include all the principal forms of insolvency and some other situations, including some dissolutions, that may be, but are not always, related to insolvency. For example, a body corporate or unincorporated body which has been dissolved under specified provisions in the Companies Act 2006 is defined by the 2010 Act as a relevant person – so the 2010 Act will apply.(2) Such dissolutions may or may not follow insolvency. If a circumstance is not listed in sections 4 to 7, it will not be capable of triggering a transfer of rights under the 2010 Act.
26.Where a person who is a relevant person for the purposes of the 2010 Act is already subject to a liability to another person or becomes subject to such a liability later, his or her rights under a contract insuring that liability will be transferred to the person to whom the liability is owed.(3)
27.The 2010 Act was, among other things, intended to address omissions from the 1930 Acts, in particular by providing for the wide variety of insolvency type procedures to which individuals, companies and other bodies may now be subject and which may adversely affect a third party. The intention was therefore that the 2010 Act should have a wider coverage than the 1930 Acts. However, while the 1930 Acts cover all forms of administration under the Insolvency Act 1986 and its Northern Ireland equivalent, the 2010 Act only covers administration pursuant to a court order. Additionally, the 2010 Act has not kept up to date with other developments in the field of insolvency, even though some of the new procedures fall within the 1930 Acts.(4) Further, whilst the 1930 Acts did not cover dissolution, the 2010 Act, while its scope is wider in this respect, still only covers a limited number of the possible forms of dissolution of bodies corporate and unincorporated bodies.(5)
28.The provisions in the Act address this by adding categories of administrations under the Insolvency Act 1986 and debt relief orders in Northern Ireland to the circumstances in which the 2010 Act applies; and by providing a means both of correcting other omissions and accommodating future changes in the law, where the 2010 Act is not amended by the legislation in question, without the need for primary legislation.
29.The inclusion of a power to change the circumstances in which the 2010 Act is to apply by making regulations will give effect to a recommendation made by the Commissions in their 2001 joint Report, which was not implemented in the 2010 Act (other than, in effect, in relation to Northern Ireland).(6)