U.K. Act Makes It Easier for Third Party to Collect From Insolvent Party's Insurer
Insurance Law Update
The Third Parties (Rights Against Insurers) Act 2010 ("the New Act") obtained Royal Assent in the United Kingdom on March 25, 2010, and will effectively replace the current Third Parties (Rights Against Insurers) Act 1930 (the 1930 Act) upon commencement, which is expected in the near future.
Like the 1930 Act, the New Act enables a third party claimant to commence proceedings directly against a defendant's liability insurer in the situation where the defendant is liable to indemnify the third-party claimant but has become insolvent. However, unlike the 1930 Act, the New Act relieves the third party claimant from first having to issue proceedings against the insolvent defendant and wait for the insured's liability to be established before it can bring proceedings directly against the defendant's insurer. Under the New Act, all issues concerning the third party's claim may be dealt with in a single set of proceedings.
The rights of the third-party claimant to obtain information about the defendant's insurance are also enhanced under the New Act, and some of the defenses that could previously be raised by the insurer against its insured under the 1930 Act have been removed.
The New Act is designed to make it easier, quicker, and more economical for third parties to recover compensation from a defendant's insurer where the defendant is insolvent, and therefore may portend an increase in the number of such third-party claims.