Legalize / United Kingdom / Public General Act

Third Parties (Rights against Insurers) Act 2010

Type Public General Act

Publication 2010-03-25

State In force

Department Statute Law Database

Source legislation.gov.uk

Reform history JSON API

Transfer of rights to third parties

Rights against insurer of insolvent person etc

1

(1) This section applies if—

(a) a relevant person incurs a liability against which that person is insured under a contract of insurance, or

(b) a person who is subject to such a liability becomes a relevant person.

(2) The rights of the relevant person under the contract against the insurer in respect of the liability are transferred to and vest in the person to whom the liability is or was incurred (the “third party”).

(3) The third party may bring proceedings to enforce the rights against the insurer without having established the relevant person's liability; but the third party may not enforce those rights without having established that liability.

(4) For the purposes of this Act, a liability is established only if its existence and amount are established; and, for that purpose, “establish” means establish—

(a) by virtue of a declaration under section 2 or a declarator under section 3,

(b) by a judgment or decree,

(d) by an enforceable agreement.

(5) In this Act—

(a) references to an “insured” are to a person who incurs or who is subject to a liability to a third party against which that person is insured under a contract of insurance;

(b) references to a “relevant person” are to a person within sections 4 to 7 (and see also paragraph 1A of Schedule 3) ;

(d) references to “transferred rights” are to rights under a contract of insurance which are transferred under this section.

Establishing liability in England and Wales and Northern Ireland

2

(1) This section applies where a person (P)—

(a) claims to have rights under a contract of insurance by virtue of a transfer under section 1, but

(b) has not yet established the insured's liability which is insured under that contract.

(2) P may bring proceedings against the insurer for either or both of the following—

(a) a declaration as to the insured's liability to P;

(b) a declaration as to the insurer's potential liability to P.

(3) In such proceedings P is entitled, subject to any defence on which the insurer may rely, to a declaration under subsection (2)(a) or (b) on proof of the insured's liability to P or (as the case may be) the insurer's potential liability to P.

(4) Where proceedings are brought under subsection (2)(a) the insurer may rely on any defence on which the insured could rely if those proceedings were proceedings brought against the insured in respect of the insured's liability to P.

(5) Subsection (4) is subject to section 12(1).

(6) Where the court makes a declaration under this section, the effect of which is that the insurer is liable to P, the court may give the appropriate judgment against the insurer.

(7) Where a person applying for a declaration under subsection (2)(b) is entitled or required, by virtue of the contract of insurance, to do so in arbitral proceedings, that person may also apply in the same proceedings for a declaration under subsection (2)(a).

(8) In the application of this section to arbitral proceedings, subsection (6) is to be read as if “ tribunal ” were substituted for “court” and “ make the appropriate award ” for “give the appropriate judgment”.

(9) When bringing proceedings under subsection (2)(a), P may also make the insured a defendant to those proceedings.

(10) If (but only if) the insured is a defendant to proceedings under this section (whether by virtue of subsection (9) or otherwise), a declaration under subsection (2) binds the insured as well as the insurer.

(11) In this section, references to the insurer's potential liability to P are references to the insurer's liability in respect of the insured's liability to P, if established.

Establishing liability in Scotland

3

(1) This section applies where a person (P)—

(a) claims to have rights under a contract of insurance by virtue of a transfer under section 1, but

(b) has not yet established the insured's liability which is insured under that contract.

(2) P may bring proceedings against the insurer for either or both of the following—

(a) a declarator as to the insured's liability to P;

(b) a declarator as to the insurer's potential liability to P.

(3) Where proceedings are brought under subsection (2)(a) the insurer may rely on any defence on which the insured could rely if those proceedings were proceedings brought against the insured in respect of the insured's liability to P.

(4) Subsection (3) is subject to section 12(1).

(5) Where the court grants a declarator under this section, the effect of which is that the insurer is liable to P, the court may grant the appropriate decree against the insurer.

(6) Where a person applying for a declarator under subsection (2)(b) is entitled or required, by virtue of the contract of insurance, to do so in an arbitration, that person may also apply in the same arbitration for a declarator under subsection (2)(a).

(7) In the application of this section to an arbitration, subsection (5) is to be read as if “ tribunal ” were substituted for “court” and “ make the appropriate award ” for “grant the appropriate decree”.

(8) When bringing proceedings under subsection (2)(a), P may also make the insured a defender to those proceedings.

(9) If (but only if) the insured is a defender to proceedings under this section (whether by virtue of subsection (8) or otherwise), a declarator under subsection (2) binds the insured as well as the insurer.

(10) In this section, the reference to the insurer's potential liability to P is a reference to the insurer's liability in respect of the insured's liability to P, if established.

Relevant persons

Individuals

4

(1) An individual is a relevant person if any of the following is in force in respect of that individual in England and Wales—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) an administration order made under Part 6 of the County Courts Act 1984,

(d) subject to subsection (4), a debt relief order made under Part 7A of the Insolvency Act 1986,

(e) a voluntary arrangement approved in accordance with Part 8 of that Act, or

(f) a bankruptcy order made under Part 9 of that Act.

(2) An individual is a relevant person if either of the following is in force in respect of the individual’s estate in Scotland—

(a) an award of sequestration made by virtue of section 2 or 5 of the Bankruptcy (Scotland) Act 2016, or

(b) a protected trust deed within the meaning of that Act, ...

(3) An individual is a relevant person if any of the following is in force in respect of that individual in Northern Ireland—

(a) an administration order made under Part 6 of the Judgments Enforcement (Northern Ireland) Order 1981 (S.I. 1981/226 (N.I. 6)),

(b) a deed of arrangement registered in accordance with Chapter 1 of Part 8 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)),

(ba) subject to subsection (4), a debt relief order made under Part 7A of that Order,

(d) a bankruptcy order made under Part 9 of that Order.

(4) If an individual is a relevant person by virtue of subsection (1)(d) or (3)(ba), that person is a relevant person for the purposes of section 1(1)(b) only.

(5) Where an award of sequestration made by virtue of section 2 or 5 of the Bankruptcy (Scotland) Act 2016 is recalled or reduced, any rights which were transferred under section 1 as a result of that award are re-transferred to and vest in the person who became a relevant person as a result of the award.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Individuals who die insolvent

5

(1) An individual who dies insolvent is a relevant person for the purposes of section 1(1)(b) only.

(2) For the purposes of this section an individual (D) is to be regarded as having died insolvent if, following D's death—

(a) D's estate falls to be administered in accordance with an order under section 421 of the Insolvency Act 1986 or Article 365 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N. I. 19)),

(b) an award of sequestration is made by virtue of section 2 or 5 of the Bankruptcy (Scotland) Act 2016 in respect of D's estate and the award is not recalled or reduced, or

(c) a judicial factor is appointed under section 11A of the Judicial Factors (Scotland) Act 1889 in respect of D's estate and the judicial factor certifies that the estate is absolutely insolvent within the meaning of the Bankruptcy (Scotland) Act 2016.

(3) Where a transfer of rights under section 1 takes place as a result of an insured person being a relevant person by virtue of this section, references in this Act to an insured are, where the context so requires, to be read as references to the insured's estate.

Corporate bodies etc

6

(1) A body corporate or unincorporated body is a relevant person if a compromise or arrangement between the body and its creditors (or a class of them) is in force, having been sanctioned in accordance with section 899 or 901F of the Companies Act 2006.

(2) A body corporate or an unincorporated body is a relevant person if, in England and Wales or Scotland—

(a) a voluntary arrangement approved in accordance with Part 1 of the Insolvency Act 1986 is in force in respect of it,

(b) the body is in administration under Schedule B1 to that Act,

(c) there is a person appointed in accordance with Part 3 of that Act who is acting as receiver or manager of the body's property (or there would be such a person so acting but for a temporary vacancy),

(d) the body is, or is being, wound up voluntarily in accordance with Chapter 2 of Part 4 of that Act,

(e) there is a person appointed under section 135 of that Act who is acting as provisional liquidator in respect of the body (or there would be such a person so acting but for a temporary vacancy), or

(f) the body is, or is being, wound up by the court following the making of a winding-up order under Chapter 6 of Part 4 of that Act or Part 5 of that Act.

(3) A body corporate or an unincorporated body is a relevant person if, in Scotland—

(a) an award of sequestration has been made by virtue of section 6 of the Bankruptcy (Scotland) Act 2016 in respect of the body's estate, and the body has not been discharged under that Act,

(b) the body has been dissolved and an award of sequestration has been made by virtue of that section in respect of its estate, or

(c) a protected trust deed within the meaning of the Bankruptcy (Scotland) Act 2016 is in force in respect of the body's estate, ...

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) A body corporate or an unincorporated body is a relevant person if, in Northern Ireland—

(a) a voluntary arrangement approved in accordance with Part 2 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N. I. 19)) is in force in respect of the body,

(b) the body is in administration under Schedule B1 to that Order,

(c) there is a person appointed in accordance with Part 4 of that Order who is acting as receiver or manager of the body's property (or there would be such a person so acting but for a temporary vacancy),

(d) the body is, or is being, wound up voluntarily in accordance with Chapter 2 of Part 5 of that Order,

(e) there is a person appointed under Article 115 of that Order who is acting as provisional liquidator in respect of the body (or there would be such a person so acting but for a temporary vacancy), or

(f) the body is, or is being, wound up by the court following the making of a winding-up order under Chapter 6 of Part 5 of that Order or Part 6 of that Order.

(4A) A body corporate or unincorporated body is a relevant person if it is in insolvency under Part 2 of the Banking Act 2009.

(4B) A body corporate or unincorporated body is a relevant person if it is in administration under relevant sectoral legislation as defined in Schedule A1.

(5) A body within subsection (1) is not a relevant person in relation to a liability that is transferred to another body by the order sanctioning the compromise or arrangement.

(6) Where a body is a relevant person by virtue of subsection (1), section 1 has effect to transfer rights only to a person on whom the compromise or arrangement is binding.

(7) Where an award of sequestration made by virtue of section 6 of the Bankruptcy (Scotland) Act 2016 is recalled or reduced, any rights which were transferred under section 1 as a result of that award are re-transferred to and vest in the person who became a relevant person as a result of the award.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) In this section—

(a) a reference to a person appointed in accordance with Part 3 of the Insolvency Act 1986 includes a reference to a person appointed under section 101 of the Law of Property Act 1925;

(b) a reference to a receiver or manager of a body's property includes a reference to a receiver or manager of part only of the property and to a receiver only of the income arising from the property or from part of it;

(c) for the purposes of subsection (3) “body corporate or unincorporated body” includes any entity, other than a trust, the estate of which may be sequestrated by virtue of section 6 of the Bankruptcy (Scotland) Act 2016;

(d) a reference to a person appointed in accordance with Part 4 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N. I. 19)) includes a reference to a person appointed under section 19 of the Conveyancing Act 1881.

Scottish trusts

7

(1) A trustee of a Scottish trust is, in respect of a liability of that trustee that falls to be met out of the trust estate, a relevant person if—

(a) an award of sequestration has been made by virtue of section 6 of the Bankruptcy (Scotland) Act 2016 in respect of the trust estate, and the trust has not been discharged under that Act, or

(b) a protected trust deed within the meaning of that Act is in force in respect of the trust estate, ...

(2) Where an award of sequestration made by virtue of section 6 of the Bankruptcy (Scotland) Act 2016 is recalled or reduced any rights which were transferred under section 1 as a result of that award are re-transferred to and vest in the person who became a relevant person as a result of the award.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In this section “Scottish trust” means a trust the estate of which may be sequestrated by virtue of section 6 of the Bankruptcy (Scotland) Act 2016.

Transferred rights: supplemental

Limit on rights transferred

8

Where the liability of an insured to a third party is less than the liability of the insurer to the insured (ignoring the effect of section 1), no rights are transferred under that section in respect of the difference.

Conditions affecting transferred rights

9

(1) This section applies where transferred rights are subject to a condition (whether under the contract of insurance from which the transferred rights are derived or otherwise) that the insured has to fulfil.

(2) 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.

(3) The transferred rights are not subject to a condition requiring the insured to provide information or assistance to the insurer if that condition cannot be fulfilled because the insured is—

(a) an individual who has died, ...

(b) a body corporate that has been dissolved, or

(4) A condition requiring the insured to provide information or assistance to the insurer does not include a condition requiring the insured to notify the insurer of the existence of a claim under the contract of insurance.

(5) The transferred rights are not subject to a condition requiring the prior discharge by the insured of the insured's liability to the third party.

(6) In the case of a contract of marine insurance, subsection (5) applies only to the extent that the liability of the insured is a liability in respect of death or personal injury.

(7) In this section—

“contract of marine insurance” has the meaning given by section 1 of the Marine Insurance Act 1906;

“personal injury” includes any disease and any impairment of a person's physical or mental condition.

(8) For the purposes of this section—

(a) “dissolved” means dissolved under the law of England and Wales, Scotland or Northern Ireland (whether or not by a process referred to as dissolution), and

(b) a body has been dissolved even if, since it was dissolved, something has happened which has the effect that (but for this paragraph) the body is treated as not having been dissolved or as no longer being dissolved.

Insurer’s right of set off

10

(1) This section applies if—

(a) rights of an insured under a contract of insurance have been transferred to a third party under section 1,

Reading this document does not replace reading the official text published on legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0. We assume no responsibility for any inaccuracies arising from the conversion of the original CLML XML to this format.