Third Parties (Rights against Insurers) Act 2010

The Third Parties (Rights against Insurers) Act 2010 is an Act of the Parliament of the United Kingdom that fundamentally reformed the law regarding the rights of third parties against insurers when the insured party is insolvent or otherwise unable to meet a claim.

Prior to the Act, third parties seeking to claim against an insurer under a policy taken out by an insolvent or dissolved company faced significant legal hurdles. They often had to reinstate the original company in order to bring a direct action against the insurer, a costly and time-consuming process. This made it difficult for legitimate claimants to obtain compensation due under insurance policies.

The Act simplifies this process by transferring the rights of the insured against their insurer directly to the third party claimant upon the insured’s insolvency or similar event. This allows the third party to bring a direct action against the insurer without needing to reinstate the dissolved insured party.

Key provisions of the Act include:

• Transfer of Rights: The Act automatically transfers the insured's rights against the insurer to the third party once the insured becomes insolvent or is subject to certain other events.
• Information Duty: The insurer has a duty to provide information to the third party about the insurance policy and related matters.
• Claims Procedure: The Act sets out procedures for the third party to bring a claim against the insurer.
• Defences: The insurer is generally entitled to rely on any defences it would have had against the insured, subject to certain exceptions and qualifications.
• Applicability: The Act applies to insurance policies entered into on or after 1 August 2016. Policies entered into before this date are governed by the Third Parties (Rights Against Insurers) Act 1930, which the 2010 Act largely replaced.

The Act has significantly improved the position of third parties claiming against insurers by streamlining the legal process and removing the need for the often-impractical step of reinstating insolvent companies. However, complexities remain, particularly regarding the interpretation of policy terms and the availability of defences to the insurer.

The Act is of significant importance to those dealing with claims where an insured party is unable to meet their obligations and insurance cover is potentially available. Lawyers, insurers, insolvency practitioners, and claimants all need to understand its provisions.