A brave new world now on the horizon? Third Parties (Rights against Insurers) Act 2010

01 June 2016


In this update, we reflect on the news that the Third Parties (Rights against Insurers) Act 2010 will finally come into force on 1 August 2016.

Third Parties (Rights against Insurers) Act 2010 (TP Act 2010)

In our alert of 6 November 2014, we reviewed the key changes that will be made by the TP Act 2010 once it becomes effective law.

At the time of that alert, changes to the proposed wording of the TP Act 2010 were anticipated to ensure that the new statute would reflect current insolvency law and in particular, the nature of the insolvency that must take place in order for the provisions of the TP Act 2010 to apply.

The required amendments were subsequently made by the Insurance Act 2015 and it has now been confirmed that the updated TP Act 2010 will finally come into force on 1 August 2016.

As at that date, the Third Parties (Rights against Insurers) Act 1930 (the 1930 Act) will be repealed and the new statute will apply to all relevant cases save where both of the following have occurred before 1 August 2016:

  1. the insured has incurred a liability to the third party; and
  2. the insured has become insolvent.

If both those factors occur prior to 1 August 2016, the 1930 Act will still apply.

As set out in our previous alert, under the TP Act 2010, the potential route for third party claimants to recover against the insurer of an insolvent party will be greatly simplified.

From a practical perspective, two of the most significant changes can be highlighted by considering a common scenario: say your business has a liability claim against an insolvent company that has been dissolved - you want to make a claim against the liability insurers of that insolvent company. Once the TP Act 2010 is in force (as compared to the "old" law under the 1930 Act):

  1. your business will no longer have to establish the insolvent company's liability before you can claim against the insurer; and, as a result
  2. you will not have to have the insolvent company restored to the register of companies in order to establish its liability.

These are just two of the changes that will affect this type of claim, massively reducing delay and expense which are key factors when you are evaluating the pros and cons of seeking recovery.

A brave new world?

In short, yes, in these insolvency scenarios. The TP Act 2010 is a radical overhaul of the law in this area and will make these types of proceedings far more accessible to parties with claims against insolvent insureds. It is long-awaited and promises to deliver. Time will tell.


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