An Act to make provision about the rights of third parties against insurers of liabilities to third parties in the case where the insured is insolvent, and in certain other cases.
[25th March 2010]
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
a relevant person incurs a liability against which that person is insured under a contract of insurance, or
(b)
a person who is subject to such a liability becomes a relevant person.
(2)
The rights of the relevant person under the contract against the insurer in respect of the liability are transferred to and vest in the person to whom the liability is or was incurred (the “third party”).
(3)
The third party may bring proceedings to enforce the rights against the insurer without having established the relevant person’s liability; but the third party may not enforce those rights without having established that liability.
(4)
For the purposes of this Act, a liability is established only if its existence and amount are established; and, for that purpose, “establish” means establish—
(a)
by virtue of a declaration under section 2 or a declarator under section 3,
(b)
by a judgment or decree,
(c)
by an award in arbitral proceedings or by an arbitration, or
(d)
by an enforceable agreement.
(5)
In this Act—
(a)
references to an “insured” are to a person who incurs or who is subject to a liability to a third party against which that person is insured under a contract of insurance;
(b)
references to a “relevant person” are to a person within sections 4 to 7;
(c)
references to a “third party” are to be construed in accordance with subsection (2);
(d)
references to “transferred rights” are to rights under a contract of insurance which are transferred under this section.
claims to have rights under a contract of insurance by virtue of a transfer under section 1, but
(b)
has not yet established the insured’s liability which is insured under that contract.
(2)
P may bring proceedings against the insurer for either or both of the following—
(a)
a declaration as to the insured’s liability to P;
(b)
a declaration as to the insurer’s potential liability to P.
(3)
In such proceedings P is entitled, subject to any defence on which the insurer may rely, to a declaration under subsection (2)(a) or (b) on proof of the insured’s liability to P or (as the case may be) the insurer’s potential liability to P.
(4)
Where proceedings are brought under subsection (2)(a) the insurer may rely on any defence on which the insured could rely if those proceedings were proceedings brought against the insured in respect of the insured’s liability to P.
(5)
Subsection (4) is subject to section 12(1).
(6)
Where the court makes a declaration under this section, the effect of which is that the insurer is liable to P, the court may give the appropriate judgment against the insurer.
(7)
Where a person applying for a declaration under subsection (2)(b) is entitled or required, by virtue of the contract of insurance, to do so in arbitral proceedings, that person may also apply in the same proceedings for a declaration under subsection (2)(a).
(8)
In the application of this section to arbitral proceedings, subsection (6) is to be read as if “tribunal” were substituted for “court” and “make the appropriate award” for “give the appropriate judgment”.
(9)
When bringing proceedings under subsection (2)(a), P may also make the insured a defendant to those proceedings.
(10)
If (but only if) the insured is a defendant to proceedings under this section (whether by virtue of subsection (9) or otherwise), a declaration under subsection (2) binds the insured as well as the insurer.
(11)
In this section, references to the insurer’s potential liability to P are references to the insurer’s liability in respect of the insured’s liability to P, if established.
claims to have rights under a contract of insurance by virtue of a transfer under section 1, but
(b)
has not yet established the insured’s liability which is insured under that contract.
(2)
P may bring proceedings against the insurer for either or both of the following—
(a)
a declarator as to the insured’s liability to P;
(b)
a declarator as to the insurer’s potential liability to P.
(3)
Where proceedings are brought under subsection (2)(a) the insurer may rely on any defence on which the insured could rely if those proceedings were proceedings brought against the insured in respect of the insured’s liability to P.
(4)
Subsection (3) is subject to section 12(1).
(5)
Where the court grants a declarator under this section, the effect of which is that the insurer is liable to P, the court may grant the appropriate decree against the insurer.
(6)
Where a person applying for a declarator under subsection (2)(b) is entitled or required, by virtue of the contract of insurance, to do so in an arbitration, that person may also apply in the same arbitration for a declarator under subsection (2)(a).
(7)
In the application of this section to an arbitration, subsection (5) is to be read as if “tribunal” were substituted for “court” and “make the appropriate award” for “grant the appropriate decree”.
(8)
When bringing proceedings under subsection (2)(a), P may also make the insured a defender to those proceedings.
(9)
If (but only if) the insured is a defender to proceedings under this section (whether by virtue of subsection (8) or otherwise), a declarator under subsection (2) binds the insured as well as the insurer.
(10)
In this section, the reference to the insurer’s potential liability to P is a reference to the insurer’s liability in respect of the insured’s liability to P, if established.
An individual is a relevant person if any of the following is in force in respect of that individual in England and Wales—
(a)
a deed of arrangement registered in accordance with the Deeds of Arrangement Act 1914,
(b)
an administration order made under Part 6 of the County Courts Act 1984,
(c)
an enforcement restriction order made under Part 6A of that Act,
(d)
subject to subsection (4), a debt relief order made under Part 7A of the Insolvency Act 1986,
(e)
a voluntary arrangement approved in accordance with Part 8 of that Act, or
(f)
a bankruptcy order made under Part 9 of that Act.
(2)
An individual is a relevant person if any of the following is in force in respect of that individual (or, in the case of paragraph (a) or (b), that individual’s estate) in Scotland—
(a)
an award of sequestration made under section 5 of the Bankruptcy (Scotland) Act 1985,
(b)
a protected trust deed within the meaning of that Act, or
(c)
a composition approved in accordance with Schedule 4 to that Act.
(3)
An individual is a relevant person if any of the following is in force in respect of that individual in Northern Ireland—
(a)
an administration order made under Part 6 of the Judgments Enforcement (Northern Ireland) Order 1981 (S.I. 1981/226 (N.I. 6)),
(b)
a deed of arrangement registered in accordance with Chapter 1 of Part 8 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)),
(c)
a voluntary arrangement approved under Chapter 2 of Part 8 of that Order, or
(d)
a bankruptcy order made under Part 9 of that Order.
(4)
If an individual is a relevant person by virtue of subsection (1)(d), that person is a relevant person for the purposes of section 1(1)(b) only.
(5)
Where an award of sequestration made under section 5 of the Bankruptcy (Scotland) Act 1985 is recalled or reduced, any rights which were transferred under section 1 as a result of that award are re-transferred to and vest in the person who became a relevant person as a result of the award.
(6)
Where an order discharging an individual from an award of sequestration made under section 5 of the Bankruptcy (Scotland) Act 1985 is recalled or reduced under paragraph 17 or 18 of Schedule 4 to that Act, the order is to be treated for the purposes of this section as never having been made.
An individual who dies insolvent is a relevant person for the purposes of section 1(1)(b) only.
(2)
For the purposes of this section an individual (D) is to be regarded as having died insolvent if, following D’s death—
(a)
D’s estate falls to be administered in accordance with an order under section 421 of the Insolvency Act 1986 or Article 365 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N. I. 19)),
(b)
an award of sequestration is made under section 5 of the Bankruptcy (Scotland) Act 1985 in respect of D’s estate and the award is not recalled or reduced, or
(c)
a judicial factor is appointed under section 11A of the Judicial Factors (Scotland) Act 1889 in respect of D’s estate and the judicial factor certifies that the estate is absolutely insolvent within the meaning of the Bankruptcy (Scotland) Act 1985.
(3)
Where a transfer of rights under section 1 takes place as a result of an insured person being a relevant person by virtue of this section, references in this Act to an insured are, where the context so requires, to be read as references to the insured’s estate.
A body corporate or an unincorporated body is a relevant person if—
(a)
a compromise or arrangement between the body and its creditors (or a class of them) is in force, having been sanctioned in accordance with section 899 of the Companies Act 2006, or
(b)
the body has been dissolved under section 1000, 1001 or 1003 of that Act, and the body has not been—
(i)
restored to the register by virtue of section 1025 of that Act, or
(ii)
ordered to be restored to the register by virtue of section 1031 of that Act.
(2)
A body corporate or an unincorporated body is a relevant person if, in England and Wales or Scotland—
(a)
a voluntary arrangement approved in accordance with Part 1 of the Insolvency Act 1986 is in force in respect of it,
(b)
an administration order made under Part 2 of that Act is in force in respect of it,
(c)
there is a person appointed in accordance with Part 3 of that Act who is acting as receiver or manager of the body’s property (or there would be such a person so acting but for a temporary vacancy),
(d)
the body is, or is being, wound up voluntarily in accordance with Chapter 2 of Part 4 of that Act,
(e)
there is a person appointed under section 135 of that Act who is acting as provisional liquidator in respect of the body (or there would be such a person so acting but for a temporary vacancy), or
(f)
the body is, or is being, wound up by the court following the making of a winding-up order under Chapter 6 of Part 4 of that Act or Part 5 of that Act.
(3)
A body corporate or an unincorporated body is a relevant person if, in Scotland—
(a)
an award of sequestration has been made under section 6 of the Bankruptcy (Scotland) Act 1985 in respect of the body’s estate, and the body has not been discharged under that Act,
(b)
the body has been dissolved and an award of sequestration has been made under that section in respect of its estate,
(c)
a protected trust deed within the meaning of the Bankruptcy (Scotland) Act 1985 is in force in respect of the body’s estate, or
(d)
a composition approved in accordance with Schedule 4 to that Act is in force in respect of the body.
(4)
A body corporate or an unincorporated body is a relevant person if, in Northern Ireland—
(a)
a voluntary arrangement approved in accordance with Part 2 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N. I. 19)) is in force in respect of the body,
(b)
an administration order made under Part 3 of that Order is in force in respect of the body,
(c)
there is a person appointed in accordance with Part 4 of that Order who is acting as receiver or manager of the body’s property (or there would be such a person so acting but for a temporary vacancy),
(d)
the body is, or is being, wound up voluntarily in accordance with Chapter 2 of Part 5 of that Order,
(e)
there is a person appointed under Article 115 of that Order who is acting as provisional liquidator in respect of the body (or there would be such a person so acting but for a temporary vacancy), or
(f)
the body is, or is being, wound up by the court following the making of a winding-up order under Chapter 6 of Part 5 of that Order or Part 6 of that Order.
(5)
A body within subsection (1)(a) is not a relevant person in relation to a liability that is transferred to another body by the order sanctioning the compromise or arrangement.
(6)
Where a body is a relevant person by virtue of subsection (1)(a), section 1 has effect to transfer rights only to a person on whom the compromise or arrangement is binding.
(7)
Where an award of sequestration made under section 6 of the Bankruptcy (Scotland) Act 1985 is recalled or reduced, any rights which were transferred under section 1 as a result of that award are re-transferred to and vest in the person who became a relevant person as a result of the award.
(8)
Where an order discharging a body from an award of sequestration made under section 6 of the Bankruptcy (Scotland) Act 1985 is recalled or reduced under paragraph 17 or 18 of Schedule 4 to that Act, the order is to be treated for the purposes of this section as never having been made.
(9)
In this section—
(a)
a reference to a person appointed in accordance with Part 3 of the Insolvency Act 1986 includes a reference to a person appointed under section 101 of the Law of Property Act 1925;
(b)
a reference to a receiver or manager of a body’s property includes a reference to a receiver or manager of part only of the property and to a receiver only of the income arising from the property or from part of it;
(c)
for the purposes of subsection (3) “body corporate or unincorporated body” includes any entity, other than a trust, the estate of which may be sequestrated under section 6 of the Bankruptcy (Scotland) Act 1985;
(d)
a reference to a person appointed in accordance with Part 4 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N. I. 19)) includes a reference to a person appointed under section 19 of the Conveyancing Act 1881.
A trustee of a Scottish trust is, in respect of a liability of that trustee that falls to be met out of the trust estate, a relevant person if—
(a)
an award of sequestration has been made under section 6 of the Bankruptcy (Scotland) Act 1985 in respect of the trust estate, and the trust has not been discharged under that Act,
(b)
a protected trust deed within the meaning of that Act is in force in respect of the trust estate, or
(c)
a composition approved in accordance with Schedule 4 to that Act is in force in respect of the trust estate.
(2)
Where an award of sequestration made under section 6 of the Bankruptcy (Scotland) Act 1985 is recalled or reduced any rights which were transferred under section 1 as a result of that award are re-transferred to and vest in the person who became a relevant person as a result of the award.
(3)
Where an order discharging an individual, body or trust from an award of sequestration made under section 6 of the Bankruptcy (Scotland) Act 1985 is recalled or reduced under paragraph 17 or 18 of Schedule 4 to that Act, the order is to be treated for the purposes of this section as never having been made.
(4)
In this section “Scottish trust” means a trust the estate of which may be sequestrated under section 6 of the Bankruptcy (Scotland) Act 1985.
Where the liability of an insured to a third party is less than the liability of the insurer to the insured (ignoring the effect of section 1), no rights are transferred under that section in respect of the difference.
This section applies where transferred rights are subject to a condition (whether under the contract of insurance from which the transferred rights are derived or otherwise) that the insured has to fulfil.
(2)
Anything done by the third party which, if done by the insured, would have amounted to or contributed to fulfilment of the condition is to be treated as if done by the insured.
(3)
The transferred rights are not subject to a condition requiring the insured to provide information or assistance to the insurer if that condition cannot be fulfilled because the insured is—
(a)
an individual who has died, or
(b)
a body corporate that has been dissolved.
(4)
A condition requiring the insured to provide information or assistance to the insurer does not include a condition requiring the insured to notify the insurer of the existence of a claim under the contract of insurance.
(5)
The transferred rights are not subject to a condition requiring the prior discharge by the insured of the insured’s liability to the third party.
(6)
In the case of a contract of marine insurance, subsection (5) applies only to the extent that the liability of the insured is a liability in respect of death or personal injury.
(7)
In this section—
“contract of marine insurance” has the meaning given by section 1 of the Marine Insurance Act 1906;
“dissolved” means dissolved under—
(a)
Chapter 9 of Part 4 of the Insolvency Act 1986,
(b)
section 1000, 1001 or 1003 of the Companies Act 2006, or
(c)
Chapter 9 of Part 5 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N. I. 19));
“personal injury” includes any disease and any impairment of a person’s physical or mental condition.
rights of an insured under a contract of insurance have been transferred to a third party under section 1,
(b)
the insured is under a liability to the insurer under the contract (“the insured’s liability”), and
(c)
if there had been no transfer, the insurer would have been entitled to set off the amount of the insured’s liability against the amount of the insurer’s own liability to the insured.
(2)
The insurer is entitled to set off the amount of the insured’s liability against the amount of the insurer’s own liability to the third party in relation to the transferred rights.
Subsection (2) applies where a person brings proceedings for a declaration under section 2(2)(a), or for a declarator under section 3(2)(a), and the proceedings are started or, in Scotland, commenced—
(a)
after the expiry of a period of limitation applicable to an action against the insured to enforce the insured’s liability, or of a period of prescription applicable to that liability, but
(b)
while such an action is in progress.
(2)
The insurer may not rely on the expiry of that period as a defence unless the insured is able to rely on it in the action against the insured.
(3)
For the purposes of subsection (1), an action is to be treated as no longer in progress if it has been concluded by a judgment or decree, or by an award, even if there is an appeal or a right of appeal.
(4)
Where a person who has already established an insured’s liability to that person brings proceedings under this Act against the insurer, nothing in this Act is to be read as meaning—
(a)
that, for the purposes of the law of limitation in England and Wales, that person’s cause of action against the insurer arose otherwise than at the time when that person established the liability of the insured,
(b)
that, for the purposes of the law of prescription in Scotland, the obligation in respect of which the proceedings are brought became enforceable against the insurer otherwise than at that time, or
(c)
that, for the purposes of the law of limitation in Northern Ireland, that person’s cause of action against the insurer arose otherwise than at the time when that person established the liability of the insured.
13-
Jurisdiction within the United Kingdom
(1)
Where a person (P) domiciled in a part of the United Kingdom is entitled to bring proceedings under this Act against an insurer domiciled in another part, P may do so in the part where P is domiciled or in the part where the insurer is domiciled (whatever the contract of insurance may stipulate as to where proceedings are to be brought).
(2)
The following provisions of the Civil Jurisdiction and Judgments Act 1982 (relating to determination of domicile) apply for the purposes of subsection (1)—
(a)
section 41(2), (3), (5) and (6) (individuals);
(b)
section 42(1), (3), (4) and (8) (corporations and associations);
(c)
section 45(2) and (3) (trusts);
(d)
section 46(1), (3) and (7) (the Crown).
(3)
In Schedule 5 to that Act (proceedings excluded from general provisions as to allocation of jurisdiction within the United Kingdom) at the end add—
“Proceedings by third parties against insurers
11
Proceedings under the Third Parties (Rights against Insurers) Act 2010.”
