As we have previous advised (July 2016), it has now been determined that the Third Parties (Rights against Insurers) Act (2010) only applies to claims in which the liability and insolvency are post August 2016.
The recent decision of Mr Justice Turner in Redman v (1) Zurich Insurance (2) ESJS1 Limited confirms that the Third Party (Rights Against Insurers) Act 2010 (“the 2010 Act”) does not have retrospective effect. As a result, third parties will have to continue to bring a claim under the 1930 Act where both the relevant insolvency and the relevant insured liability occurred before the commencement date of the 2010 Act (which is 1 August 2016).
Peter Redman worked for the company which became ESJS1 between 1952 and 1982. On 5 November 2013 he died from lung cancer, which it was alleged, was caused by exposure to asbestos during the course of his employment. On 30 January 2014 ESJS1 was wound up and was later dissolved on 30 June 2016.
Mrs Redman brought a claim against the insurer for ESJS1, Zurich, in which she sought to recover damages for her husband’s suffering and death under the Third Party Rights regime.
As set out in our July 2016 the 2010 Act has a number of advantages over the 1930 Act:
The 1930 Act requires the liability against the insured to be established (by judgment, which can only be entered after the insured is restored to the company register under section 1030 of the Companies Act 2006) prior to the claim being brought against the insurer; whereas
The 2010 Act allows a claim for both liability and coverage to be made against the insurer alone, avoiding the cost and time of restoring the company to the register.
Mrs Redman attempted to bring her claim under the 2010 Act. Unfortunately, the date of the company’s insolvency and the date of the company’s alleged liability had arisen at least some thirty years before the commencement of the 2010 Act. The Third Party Rights Against Insurers Act 2010 expressly states that the 1930 Act continues to apply in circumstances where the liability is incurred and the insolvency pre-date August 2016.
Mr Justice Turner stated in his judgment:
“A relevant person "incurs a liability" under section 1 of the Third Party (Rights Against Insurers) Act 2010 when the cause of action is complete and not when the claimant has established the right to compensation whether by a judgment or otherwise”
As a result, the Judge struck out the claim, saying that to apply the interpretation of the Act favoured by Mrs Redman would be tantamount to ”judicial legislation”.
What this means for you
Despite the fact that the precise intention of the 2010 Act was to avoid the complexity and unfairness of having to secure judgment against a dissolved company before pursuing the insurer, because of the wording of the 2010 Act, the 1930 Act continues to apply to those cases where the insolvency event (and the underlying liability) pre-dates 1 August 2016.
Until around some time in the mid 2020’s (when any third party liability will be time-barred) the old regime will remain relevant, and insureds, brokers and insurers will have to live with two potentially relevant regimes.
The judgment can be found here.