The collapse of Thomas Cook will have far-reaching effects. The headlines will focus on the repatriation of those stranded across the world, thousands of job losses and the inevitable cancellations of previously booked holidays.
But what of those claimants who have valid personal injury claims against Thomas Cook in some form? Is the insolvency of a defendant company a bar to a personal injury claim?
From a casualty perspective, injured claimants may be required to pursue a claim against a company that has ceased to operate in the period following their injury.
In those circumstances, what actions can a claimant take, and what can insurers do to protect themselves against the risk associated with these latent claims?
A claimant pursuing an insolvent company who did not hold relevant public liability insurance at the time of their accident face an uphill struggle to recover any sums of any meaningful nature.
Pursuing a claim against a company which has been liquidated, been subject to compulsory winding up or is in administration is beset by barriers, and is likely to be a fruitless exercise as the company will no longer have the assets to pay any damages awards.
For those claimants pursuing insolvent companies which had valid public liability insurance at the time of their accident, the Third Party (Rights Against Insurers) Act 2010 ("TPRAI") made this process significantly simpler.
Under TPRAI, a claimant can claim against the insolvent company's insurer directly, without first having to sue the insolvent company.
This meant that a claimant no longer needs to restore a dissolved company to the Companies Register or carry out additional actions before commencing proceedings. The Claimant may, during the same proceedings, seek a declaration from the Court for both the insolvent company's and its insurer’s liability.
Insurers are required, once their policyholder becomes insolvent, to provide details of their insurance cover when requested by the claimant within 28 days. Therefore, where insurers become aware of their policyholder's insolvency, they should be ready for these requests, and ensure that their records relating to this policyholder are maintained and accurate.
It may also be prudent to maintain contact with key individuals from the insolvent company, in the event that additional information is required in the event of a claim.
In addition, any rights transferred to the third party will be subject to the defences which the insurer could use against their insolvent policyholder, i.e if there was a breach of a warranty or condition precedent.
However, "technical" defences will not be accepted such as:
- 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. So, for example, the third party will be able to give notification where a policy provides that the notification must be made by the insured itself.
- A defence of breach of duty to provide information, where the insolvent company has been dissolved, and thus is unable to comply.
However, the provisions of TPRAI should not mean that insurers should look to settle any claims for personal injury made against an insolvent company; but the provisions of the TPRAI are not without benefit.
As the insurers will be a party to the single action, they will be given the opportunity to consider the claim fully, both from a liability and quantum perspective. They will also be able to consider whether any defences under the policy apply, in respect of whether or not the claim should be subject to an indemnity under the policy.
In a climate of financial uncertainty, there will be corporate casualties. Nonetheless, for those insurers who provided cover to those defunct companies, the guidance is very clear on what is expected of them, and in being able to fully consider any subsequent personal injury claims from beginning to end, they are offered a level of control, not previously available before the introduction of TPRAI.