Redman v Zurich (REV 1) [2017] EWHC 1919

The Third Parties (Rights Against Insurers) Act 2010 (“the 2010 Act”), which covers cases in which there is an insolvent insured, was enacted as a response to criticisms levelled at its predecessor, the 1930 Act of the same name. The timely judgment in Redman v Zurich (Rev 1) [2017] EWHC 1919, clarified the circumstances in which each of these Acts will apply to a claim.

The 2010 Act

The 2010 Act, taking effect from the commencement date of 1 August 2016, introduced a more “claimant friendly” regime by allowing a third party to make their claim directly against the insurer whereas under the 1930 Act they first needed to issue proceedings against the insolvent insured. An additional effect was the removal of the previous need to restore dissolved companies to the register in order to pursue such an initial claim. This creates a considerable benefit to a third party pursuing a claim under the new regime.

Redman v Zurich – The Facts

The Claimant was a widow whose husband had died from lung cancer in 2013. It was alleged that the cancer had been caused by exposure to asbestos during his employment for the defendant insured company (ESJS1) which he had worked for between 1952 and 1982. ESJS1 had been voluntarily wound up in January 2014 and dissolved in June 2016. The basis of the Claimant’s claim was to avoid the procedural hurdles of the 1930 Act.

Retrospective Effect?

The 2010 Act, while intended to replace the 1930 Act, does allow for the continued operation of the earlier legislation in cases where prior to the commencement date:

(a) The insured had become a “relevant person” (i.e. had become insolvent), and

(b) The relevant person had incurred a liability against which they were insured.

While in Redman v Zurich both these events had occurred prior to 1 August 2016, the Claimant’s representatives attempted to argue that the 2010 Act had retrospective effect. Given that the 2010 Act specifically allowed for the operation of the earlier legislation as outlined above it is difficult to see how the legislation could lend itself to such an interpretation. Additionally there seems little rationale in the two Acts running concurrently; given the obvious advantages of the 2010 Act why would any claimant opt for the additional procedural hurdles of the 1930 Act? In light of these considerations, the court was unpersuaded by the Claimant’s argument, and the claim was struck out on the grounds that the 1930 Act and 2010 Act do not run in parallel and so the 2010 Act cannot be applied retrospectively and the 1930 Act regime will apply instead. In fact the judgment in Redman v Zurich did not adversely affect the Claimant as by this point the parties had co-operated and ESJS1 had been restored to the register.

The wider implications

In Redman v Zurich the judge observed that a number of claims currently being made (purportedly) under the 2010 Act would be effectively determined by the case in hand. For now the judgment would seem to be an unequivocal settlement of the issue; until such time as all claims falling under the 1930 Act become statute barred the earlier legislation will continue to apply to cases in the circumstances outlined above. Therefore, insurers and their advisers (bringing subrogated claims or defending claims, involving insolvent insureds) will need to carefully consider which Act applies, and prepare their strategy accordingly.