Insurance Law

Third Parties (Rights against Insurers) Act 2010

The Third Parties (Rights against Insurers) Act 2010 is the implementation of recommendations by the Law Commission about the rights of a third party to claim directly against an insurer.

When through the actions of a wrongdoer, an individual (a third party) suffers an injury or a loss, the individual can claim against the insured for compensation. The insured will claim against his insurer if third party is successful, and the money from this will settle the liability.

If the insured is insolvent at the time of the claim however, the insurance money becomes part of the total assets that need to be distributed to the creditors. Therefore something is needed to protect the third party and make sure he or she receives what is rightfully owed to them.

This issue is provided for by the Third Parties (Rights against Insurers) Act 1930. The 2010 Act will take over from this eighty year old Act and allow the third party to claim directly against the insurer without the liability of the insured being established first. The new Act, like the 1930 Act, will not apply to reinsurance. Section 15 confirms that it does not apply "where the liability referred to…is itself a liability incurred by an insurer under a contract of insurance."

Although it has received Royal Assent, the new Act is not yet in force. Implementation will be on a date to be announced by the Secretary of State.

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