The Third Parties (Rights Against Insurers) Act 2010 is a step closer to coming in to force with the publication of draft Regulations whose aim is to correct omissions in the Act. Once in force the Act will improve the position of claimants who are bringing actions against insolvent defendants and looking to recover from those defendants' insurers.
The Third Parties (Rights Against Insurers) Act 2010 (the Act) received royal assent 6 years ago and has still not come in to force due to omissions in it which were found following its enactment. The Act was amended by the Insurance Act 2015, which corrected some of the omissions, and the draft Regulations which have now been laid before Parliament aim to correct the remaining omissions so that the Act can finally be brought into force.
The draft Regulations have to be approved by both Houses of Parliament before they can be made by the Secretary of State and the commencement date will be at least 3 months after this. Whilst the precise date of the Act coming in to force is, therefore, still unknown, the Secretary of State has said he intends to make the Regulations "without delay", subject to Parliament's approval, and it seems clear that the Act will come in to force at some point later this year.
What will the Act change?
The Act is intended to improve the protection given to claimants under the Third Parties (Rights Against Insurers) Act 1930 who are bringing actions against insolvent defendants and looking to recover from those defendants' insurers. Whilst the Act will make a number of changes, two key ones are:
- A new one-stage process: a claimant will be able to join the defendant's insurer in the same proceedings as the defendant and hence resolve liability and insurance coverage issues together. Currently, under the 1930 Act, separate proceedings against insurers are necessary after the liability of the defendant policyholder has been established. This streamlining of the process should lead to a saving in both time and costs.
- Improved information: a claimant will have enhanced rights of information as to the insurance position of an "insolvent" defendant, both as to the information that can be obtained and from whom. Under the Act, information can be sought from any person a claimant believes will be able to provide such information which will include, we consider, insurance brokers. In contrast, under the 1930 Act, the rights of a claimant were less specific and were thought to be narrower in scope. Further, the 1930 Act allowed information to be sought from only the insurer and the then 'insolvent' policyholder.
Overall the Act, when in force, should allow rights to be pursued more quickly and at lower cost which, we would suggest, is for the benefit of policyholders and insurers alike.
We will be reminding clients about the detail of the changes the Act will bring about and their impact closer to the commencement date.