Third Parties (Rights against Insurers) Bill [HL]

House of Commons

Session 2009 - 10
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Other Bills before Parliament

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
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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
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(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.
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(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
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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.
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(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.
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(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
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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—
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(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.
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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.
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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.
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(7)
In this section—
“contract of marine insurance” has the meaning given by section 1 of the
Marine Insurance Act 1906;