I previously considered this subject in a blog in November 2014, which can be found here. I had been faced with the problem of an insolvent company in the context of an injury claim arising out of an occupier’s liability accident in Cornwall. Whilst staying in a hotel my client had suffered a nasty injury to her ankle, The hotel was run by a limited company which went into liquidation during the case.
At that time, the relevant law was contained within the Third Party (Rights Against Insurers Act) 1930. This meant that an injured person could not obtain a Judgment against a defunct company even if there was a valid insurance policy in place. The content of the 1930 Act meant that in order to pursue my client’s claim against the company, I had to restore them to the register of companies. Once I had done this, I would then be able to pursue the claim and seek judgment, which the insurers would then have to satisfy.
Restoring a company to the register involves an application to the Chancery Court which is fiddly, time consuming, and costly. It also delays the progress of the claim and any following court proceedings. I successfully made an application in the above case and it was settled shortly after.
In my previous blog, I highlighted the proposed Third Party (Rights Against Insurers) Act 2010 which at that time had not come into force and there was no confirmed date when it would. The 2010 Act proposed removing the requirement to restore a defunct company to the register. It would allow claimants to issue directly against an insurer and obtain judgment which they would then have to satisfy.
Fortunately, since that time, I have not encountered this problem again whilst dealing with my caseload, although I have been careful to regularly check the status of defendants on the Companies House website. Therefore, I completely missed the news (a headline grabber I am sure) that the 2010 Act finally came into force as of 1 August 2016. I was recently notified of this development by a colleague, who had endured my previous blog on this subject.
The 2010 Act has remedied the problem as I hoped it would. Under Section 1 of the 2010 Act, the rights of the insolvent company under the policy of insurance are transferred to the claimant. This means the claimant can bring proceedings directly against the insurer. The insurance company is only liable to pay damages if the defunct company is found to have been negligent and they have the same opportunity to raise any defence which the company could have raised. If the claimant is successful with the claim and a judgment order is made, then the insurer obviously must satisfy it. This means there is no need to restore the defunct company to the register. This saves time and money. It is a completely sensible step.
Is the 2010 Act retrospective? The answer indicated by Schedule 3 of the 2010 Act is no, and that if the date of negligence and date of insolvency pre-date 1 August 2016, you must proceed under the 1930 Act and make an application to restore the defunct company to the register. This issue was extensively considered in Redman v Zurich Insurance Plc 2017 EWHC 1919 QB. This decision confirmed my understanding of the 2010 Act.
Whilst the 2010 Act is a good step forward to resolve the previous problems, the 1930 Act cannot be forgotten. If you have any claims where liability and insolvency have occurred before 1 August 2016, then you will have to restore the company to the register before you can enforce against the insurer. The 2010 Act will not apply. This is still a welcome development, which should save a considerable amount of time and money.