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Third Parties (Rights against Insurers) Bill [HL]


Third Parties (Rights against Insurers) Bill [HL]

1

 

A

Bill

To

Make provision about the rights of third parties against insurers of liabilities

to third parties in the case where the insured is insolvent, and in certain other

cases. 

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and

consent of the Lords Spiritual and Temporal, and Commons, in this present

Parliament assembled, and by the authority of the same, as follows:—

Transfer of rights to third parties

1       

Rights against insurer of insolvent person etc

(1)   

This section applies if—

(a)   

a relevant person incurs a liability against which that person is insured

under a contract of insurance, or

5

(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

10

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

15

3,

(b)   

by a judgment or decree,

(c)   

by an award in arbitral proceedings or by an arbitration, or

(d)   

by an enforceable agreement.

(5)   

In this Act—

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Bill 79                                                                                                 

54/5

 
 

Third Parties (Rights against Insurers) Bill [HL]

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(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;

(c)   

references to a “third party” are to be construed in accordance with

5

subsection (2);

(d)   

references to “transferred rights” are to rights under a contract of

insurance which are transferred under this section.

2       

Establishing liability in England and Wales and Northern Ireland

(1)   

This section applies where a person (P)—

10

(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

15

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

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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

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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.

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(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

35

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

40

(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.

 
 

Third Parties (Rights against Insurers) Bill [HL]

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3       

Establishing liability in Scotland

(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

5

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.

10

(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).

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(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

20

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”.

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(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.

30

(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

4       

Individuals

(1)   

An individual is a relevant person if any of the following is in force in respect

35

of that individual in England and Wales—

(a)   

a deed of arrangement registered in accordance with the Deeds of

Arrangement Act 1914,

(b)   

an administration order made under Part 6 of the County Courts Act

1984,

40

(c)   

an enforcement restriction order made under Part 6A of that Act,

(d)   

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

Insolvency Act 1986,

 
 

Third Parties (Rights against Insurers) Bill [HL]

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(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 any of the following is in force in respect

of that individual (or, in the case of paragraph (a) or (b), that individual’s

5

estate) in Scotland—

(a)   

an award of sequestration made under section 5 of the Bankruptcy

(Scotland) Act 1985,

(b)   

a protected trust deed within the meaning of that Act, or

(c)   

a composition approved in accordance with Schedule 4 to that Act.

10

(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

15

8 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I.

19)),

(c)   

a voluntary arrangement approved under Chapter 2 of Part 8 of that

Order, or

(d)   

a bankruptcy order made under Part 9 of that Order.

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(4)   

If an individual is a relevant person by virtue of subsection (1)(d), that person

is a relevant person for the purposes of section 1(1)(b) only.

(5)   

Where an award of sequestration made under section 5 of the Bankruptcy

(Scotland) Act 1985 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

25

person who became a relevant person as a result of the award.

(6)   

Where an order discharging an individual from an award of sequestration

made under section 5 of the Bankruptcy (Scotland) Act 1985 is recalled or

reduced under paragraph 17 or 18 of Schedule 4 to that Act, the order is to be

treated for the purposes of this section as never having been made.

30

5       

Individuals who die insolvent

(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—

35

(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 under section 5 of the Bankruptcy

(Scotland) Act 1985 in respect of D’s estate and the award is not recalled

40

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 1985.

45

 
 

Third Parties (Rights against Insurers) Bill [HL]

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(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.

6       

Corporate bodies etc

5

(1)   

A body corporate or an unincorporated body is a relevant person if—

(a)   

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 of the Companies Act 2006, or

(b)   

the body has been dissolved under section 1000, 1001 or 1003 of that

10

Act, and the body has not been—

(i)   

restored to the register by virtue of section 1025 of that Act, or

(ii)   

ordered to be restored to the register by virtue of section 1031 of

that Act.

(2)   

A body corporate or an unincorporated body is a relevant person if, in England

15

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)   

an administration order made under Part 2 of that Act is in force in

respect of it,

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(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,

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(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

30

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 under section 6 of the

Bankruptcy (Scotland) Act 1985 in respect of the body’s estate, and the

35

body has not been discharged under that Act,

(b)   

the body has been dissolved and an award of sequestration has been

made under that section in respect of its estate,

(c)   

a protected trust deed within the meaning of the Bankruptcy (Scotland)

Act 1985 is in force in respect of the body’s estate, or

40

(d)   

a composition approved in accordance with Schedule 4 to that Act is in

force in respect of the body.

(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

45

Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N. I. 19)) is

in force in respect of the body,

 
 

Third Parties (Rights against Insurers) Bill [HL]

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(b)   

an administration order made under Part 3 of that Order is in force in

respect of the body,

(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),

5

(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

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(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.

(5)   

A body within subsection (1)(a) is not a relevant person in relation to a liability

that is transferred to another body by the order sanctioning the compromise or

15

arrangement.

(6)   

Where a body is a relevant person by virtue of subsection (1)(a), 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 under section 6 of the Bankruptcy

20

(Scotland) Act 1985 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)   

Where an order discharging a body from an award of sequestration made

under section 6 of the Bankruptcy (Scotland) Act 1985 is recalled or reduced

25

under paragraph 17 or 18 of Schedule 4 to that Act, the order is to be treated for

the purposes of this section as never having been made.

(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

30

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

35

body” includes any entity, other than a trust, the estate of which may

be sequestrated under section 6 of the Bankruptcy (Scotland) Act 1985;

(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

40

Conveyancing Act 1881.

7       

Scottish trusts

(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 under section 6 of the

45

Bankruptcy (Scotland) Act 1985 in respect of the trust estate, and the

trust has not been discharged under that Act,

 
 

Third Parties (Rights against Insurers) Bill [HL]

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(b)   

a protected trust deed within the meaning of that Act is in force in

respect of the trust estate, or

(c)   

a composition approved in accordance with Schedule 4 to that Act is in

force in respect of the trust estate.

(2)   

Where an award of sequestration made under section 6 of the Bankruptcy

5

(Scotland) Act 1985 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)   

Where an order discharging an individual, body or trust from an award of

sequestration made under section 6 of the Bankruptcy (Scotland) Act 1985 is

10

recalled or reduced under paragraph 17 or 18 of Schedule 4 to that Act, the

order is to be treated for the purposes of this section as never having been

made.

(4)   

In this section “Scottish trust” means a trust the estate of which may be

sequestrated under section 6 of the Bankruptcy (Scotland) Act 1985.

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Transferred rights: supplemental

8       

Limit on rights transferred

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.

20

9       

Conditions affecting transferred rights

(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

25

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—

30

(a)   

an individual who has died, or

(b)   

a body corporate that has been dissolved.

(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.

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(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.

40

(7)   

In this section—

“contract of marine insurance” has the meaning given by section 1 of the

Marine Insurance Act 1906;

 
 

 
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