firm news

Stephen Baker
Stephen Baker,
Improved rights for claimants against insurers of insolvent defendants
16 September 2016

Before 1 August 2016, under the Third Parties (Rights Against Insurers) Act 1930, the rights of an insured to bring a claim against its insurer were automatically transferred to a third party on the happening of a number of specific insolvency events, once that third party had established the insured’s liability to it for a claim. The 1930 Act also preserved the policy proceeds separate from the assets available to an insolvent insured’s creditors. For parties with claims against insolvent companies this was a vast improvement on the common law position where insurance policy proceeds would go to the liquidator to be distributed to all the insured’s creditors. However, over 80 years of legal developments and changes to insolvency laws since the 1930s resulted in the 1930 Act not working as well as it should. 

A new Act to deal with the changes was formulated in 2010 which finally came into force on 1 August 2016. The delay in the 2010 Act coming into force enabled it to be significantly buffed by the Insurance Act 2015 and the Third Parties (Rights Against Insurers) Regulations 2016 to address a wider range of insolvency situations. The purpose of the 2010 Act is to make it easier to bring a claim against a defunct company by:

  • Covering a wide array of insolvency, administration or dissolution situations.
  • Removing the need for claimants to restore dissolved companies that have been struck off the Companies Register.
  • Providing for earlier disclosure of insurance arrangements by a wider range of people to assist a claimant in identifying an insurer.
  • Allowing a claimant to notify the insolvent company’s insurer directly of an insurance claim and proceed with a claim without establishing liability against the insolvent company first.

The 2010 Act will make it easier for third party claimants to determine if there was insurance cover in place for the insolvent company for the loss suffered. It will also make it clearer at an early stage whether the insurer may have grounds for avoiding covering the insured’s liability before the cost of establishing liability is incurred.

For more information about the issues raised in this article or to find out more about how the Dispute Resolution team can help you please contact Stephen Baker on 0118 952 7206 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

award winning law firm

Boyes Turner are proud to have received the following awards and recognition.