Third Parties (Rights against Insurers) Bill [HL] - Special Public Bill Committee Contents

Supplementary memorandum by Professor Rob Merkin, Professor of Commercial Law, University of Southampton

  I have had the opportunity to review the comments of Professor Adrian Briggs[1] and Maggie Hemsworth.[2] They cast doubt upon various aspects of the Bill. My view is that, these comments, notwithstanding, the Bill is for the most part "fit for purpose" and that there is no real impediment to legislating (subject to the minor points raised in my initial report).


  Professor Briggs is largely concerned with conflict of laws issues, and he raises points of great complexity where the jurisdiction for the proceedings is not England or where the policy/claim are not governed by English law. However, these should not be of great concern. The Bill is an insolvency measure, designed to ensure that if there is an English insolvency then the insured's assets, insofar as they consist of the insurance proceeds of a liability claim, are taken outside the insolvency and diverted to the third party whose claim is generated those proceeds. In effect, the Bill makes the third party a secured creditor in the insolvency, by allowing the third party to obtain his own judgment against the insurer under the policy. The issues raised by Professor Briggs are complex, but my submission is that the international tail should not be allowed to wag the domestic dog.

  The Bill allows a third party to establish and quantify the insured's liability, typically by judgment. If the judgment is not satisfied, and the third party is not at that stage insolvent, then the third party can institute insolvency proceedings against the insured in order to become the transferee of the insured's right of action against the insurer. If the insured has no assets in England then the Bill cannot operate because the insured cannot be a "relevant person" for insolvency purposes. Thus, in most cases with a significant foreign element, the chances are that the insured will simply not be a "relevant person". By contrast, if the insured does have assets in England, if only in the form of an insurance claim payable in England, then the Bill can operate because English insolvency proceedings are possible.

  There are two separate issues relating to a direct claim against the insurer, jurisdiction, and applicable law.


  The Bill creates a direct claim against the insurer by the third party. Where the third party is domiciled in England and the insurer is domiciled within the EEA, that claim can be brought in England by virtue of articles 9 and 11 of the Brussels Regulation (44/2001), and exclusive jurisdiction clauses are for the most part overridden. Assuming that the insured is not domiciled in England, or the insurer is not domiciled within the EEA, it may be more difficult for the third party to establish the jurisdiction of the English court over a direct claim against the insurer, although it may be possible to join the insurer as a necessary and proper party to a substantive claim by the third party against the insured if the English court has jurisdiction over that claim. Whether or not the permission of the English court is required to serve the insurer (and I would bow to Professor Briggs' view that CPR 6.33 removes the need for permission), the third party may still be faced with a stay application by the insurer on the grounds of an exclusive jurisdiction clause in the insurance policy or possibly just forum non conveniens. Ultimately the English court has the right to refuse to stay its own proceedings in the face of an application for such stay, and the potential operation of the Bill may be just the situation which would justify refusal of a stay. There is indeed authority for this proposition under the 1930 Act: The Irish Rowan [1989] 2 Lloyd's Rep 144.

  If the claim against the insurer is not one over which the English court has any jurisdiction, then obviously the direct claim recognised by English law will be unavailable unless the law of the jurisdiction in question recognises such a claim. If the third party obtains a foreign judgment against the insurer, then presumably it can be enforced in England. Plainly the Bill cannot deal with this situation.

Applicable law

  If the English courts possess jurisdiction over a direct action by the third party against the insurer, the claim against the insurer is almost certainly to be classified by English conflicts rules as contractual, in the light of the ruling of the Court of Appeal in Maher v Groupama Grand Est [2009] EWCA Civ 1191, so that the law applicable to the claim has on the face of things to be determined by the rules in the Rome I Regulation. If that law is not English law, and that law does not recognise any transfer of rights, I am not sure that it matters. It could be argued that the issues are procedural and not substantive, so that Rome I does not apply at all. Alternatively, it could be argued (and I think that there is a stronger case than Professor Briggs recognises) that the Bill is a mandatory rule of the forum which cannot be ousted by the application of a foreign law (under article 9 of Rome I).

Other matters

  Professor Briggs has made some other observations, in italics below. I have annotated these with my own comments.

    Clause 1(4): does "judgment or decree" mean a judgment from an English court? Or does it include a judgment which was given by a foreign court but which qualified or would have qualified for recognition in English private international law? Or does it include a foreign judgment which, however, would not qualify for recognition in English private international law? It seems improbable that the last of these is included, but the middle option is harder to predict. What is the effect, for example, of a judgment from a foreign court declaring that the insurer had no liability to the insured?

  The rules for recognition of foreign judgments in private international law are not strictly relevant to insurance contracts. The question in every case is whether the insured has established and quantified his loss, as a trigger for a direct claim against the insurer. Where the insured has been sued to judgment in a foreign court, that judgment is to be treated as binding on the insurer unless it is manifestly perverse or unless the insured failed to defend the claim properly. Of course, in practice, in the majority of cases the insurer will have conducted the defence and so the latter argument will not be open to it. The principles were laid down in the analogous reinsurance context in Commercial Union v NRG Victory [1998] 2 Lloyd's Rep 600. So it will always be open to an insurer to challenge a foreign judgment (or, presumably, an arbitration award) on these grounds, in the direct action brought by the third party. That necessarily goes also for a settlement of the claim against the insured, which is only binding on the insurer if it reflects what would have happened if the assured had been sued to judgment. The point, however, is that armed with a judgment, award or settlement, whatever its origins, the third party can bring his action against the insurer, and it is then open to the insurer in those proceedings to demonstrate that the insured's liability had not been properly established and quantified so that there is no liability to indemnify the insured (clauses 1(3) and 2(3)).

    Clause 2(7): I am not clear whether this provision deals with the case in which the liability of the insurer to the insured, and no more, is according to the policy of insurance required to be sorted out by arbitration, or a case in which the third party, to whom the rights have been transferred, has to bring his direct claim against the insurers by way of arbitration. If it is the former, I am not sure how this would work, for if it is only the rights which are transferred to the third party by clause 1, it is not obvious that the obligation (duty, burden) to proceed by arbitration does transfer. If "rights" means "rights and associated obligations"', this would be less of a point, but that does not strike me as the way to interpret "rights". If it is the later (sic), it would appear to be necessary to say specifically that this Act shall be applied in arbitration proceedings?

  In my view it is obvious that the obligation to arbitrate is transferred under the policy. There is authority for that proposition under the 1930 Act (Freshwater v Western Australia Insurance [1933] 1 KB 515), and clause 9(1) puts the matter beyond doubt: an arbitration clause is a separate contract, and operates as the only means by which the insured claim from the insurer (any attempt to bring judicial proceedings will be stayed under section 9 of the Arbitration Act 1996).

    What would happen if the arbitrators were to come to the conclusion that, because they are entitled to choose the law which they will apply, that they will choose to apply the law which governs the contract of insurance and that as a result they will not apply the provisions of the Act? It may be that this is the intended result, and that the power of the tribunal to choose the law which applies in the dispute is more important than the application of the rules of this Act. But at the moment, I do not see what will prevent arbitrators choosing not to apply the provisions of the Act in a case in which they consider that the claim of the third party should be dealt with by (and rejected by reference to) the law which governed the insurance contract.

  I do not see the issue here. In the first place most policies containing arbitration clauses also contain choice of law clauses, so that the arbitrators have no right to choose the applicable law. But even if they do have the right to choose the applicable law, I don't understand how they can refuse to apply the Bill, because the Bill is nothing to do with them. The function of the arbitrators is to determine whether there is any liability under the policy. Once they have done that, and they have ruled that there is liability, it is for the third party to enforce the award under the Bill: the arbitrators are irrelevant at that stage. The Bill also contemplates that, if the insured's liability to the third party has not been established, the third party is entitled to raise that issue in the arbitration. As long as the arbitration has its seat in England, if the arbitrators refuse to deal with the liability issue they can be required to do so by means of an application to the English court under section 67 of the Arbitration Act 1996.

    Jurisdiction agreements in insurance contracts. I do not see what is intended to be the result if the insurance contract provides, on a true construction, that all claims under it (including any direct claim) are to be brought before a particular court. In the context of jurisdiction agreements falling within the scope of the Brussels I Regulation, I can see that there may be little which legislation can say. But what is to happen if the insurance provides that all claims against the insurer are to be brought before the courts of New South Wales? Jurisdiction clauses are not proscribed by clause 18: does that mean that a court can give effect to such a clause? If that is so, it looks odd that a court is directed by clause 18(c) to apply the Act even though there is a choice of law agreement for another law, but is not prevented from giving effect to an agreement on jurisdiction which will mean that the Act is not applied after all. I suspect that I have not fully understood the intention here.

  This is an unlikely scenario: if the defendant is subject to English jurisdiction, there is little prospect that he will be insured by Australian insurers. Let it be supposed, however, that the policy contains a NSW exclusive jurisdiction clause. The third party brings an action in England to establish and quantify the liability of the insured, and then seeks a declaration of liability under the policy. The English court is perfectly free to refuse a stay of the declaratory proceedings and to deal with the issue itself, at least if the insured itself has not issued proceedings against the insurer in Australia.

    Service out of the jurisdiction on insurers to whom the Brussels I Regulation does not apply to give or to refuse jurisdiction. If the claim under the Act is seen as one falling within CPR r 6.33(3), which it seems to me that it is, service out on an overseas insurer will be allowed without the prior permission of the court. That would mean that an Australian insurer could be served without the prior permission of the court, even though the insurance contract was not governed by English law, the liability of the insured to the insurer had nothing to do with England or English law, and none of the parties had any residential connection to England. That may be exactly what is intended, but it is a striking assertion of jurisdiction over a case whose component parts may have little to do with England. If such service is made (or if the insurer has been served here), may the insurer nevertheless apply for a stay of proceedings on the ground of forum non conveniens, pointing to the weakness of connection to England and the strength of connection to another jurisdiction? It is not obvious to me, but there must be a possibility that the wording of the Act would lead a court to the conclusion that no power to stay is permitted. First, if permission is not needed to serve, it may seem odd that that discretionary element still returns to play a part if the defendant insurer contests the jurisdiction or its exercise. Second, cl 18 could be taken to say that the Act is to apply even though there are these foreign elements; that if there is a stay on the grounds listed as irrelevant to the application of the Act in cl 18, the effect would be that the Act would not apply, and that therefore the court may not grant a stay of proceedings. That would give the Act a very wide sphere of operation.

  If none of the parties has any connection with England, the insolvency proceedings are unlikely to be English so the Act would not apply anyway. But that aside, in this type of case the assured, armed with his judgment against the insured, can seek to enforce that judgment and to initiate insolvency proceedings in England if it is not satisfied. On the assumption that the insured is prepared to lapse into insolvency rather than make a claim against its liability insurers, there would be every reason for the English court to refuse to stay proceedings by the third party against the insurers for a declaration as to their liability under the policy and thus their liability to the third party, given that there are no Australian proceedings.

    Application of the Act in cases where all the contacts are not with England: Clause 18. It is easy to see why the Act should not be prevented from applying just because the contract of insurance is governed by a foreign law when everything else is English, or when the insurer is foreign (esp, perhaps, if it is Gibraltarian) when everything else is English, and so forth; and Clause 18 says that. But it also appears to say that the Act will still apply even though all the matters listed in Clause 18 are non-English; the Notes on Clauses could easily be read as making that point. Or, to put it another way, there is no geographical, personal, or other limit on the application of the Act. Is it really intended that it should apply to cases in which there is no English connection at all? It may be that the correct way to read Clause 18 is simply saying that the factors listed do not prevent the application of the Act, but that the question whether the Act does apply is also subject to (answered by) the principle that Parliament is presumed not to intend to legislate for its laws to have extra-territorial effect. Something similar arose before the House of Lords in Serco Ltd v Lawson [2006] UKHL 3, which dealt with unfair dismissal. The legislation in that case was also silent as to its scope, but no-one really supposed that it applied to and employee and employer from Ruritania who were parties to a Ruritanian contract performed in Ruritania. Lord Hoffmann was able to deduce and limit the scope of the Act, but it cost a lot of someone's money for Parliament's will on this point to be ascertained, and to be shown to be different from what the Court of Appeal had found it to be. In the case of this proposed Act, is it the will of Parliament that the Act apply to every single case in which a person with a claim against an insured wishes to pursue the insurer? If it is not the will of Parliament that this be permitted in every single such case (and bearing in mind that service out appears to be available as of right if the insurer is not here), I cannot myself see where the limitation is. Reasonable people may disagree as to what it should be, but it is not apparent to me that the answer is given on the face of the text.

  There is a geographical limitation on the Act: the English court must have jurisdiction over the claim by the third party against the insurer, and the insolvency must be in England.

    Application of Clause 18 and the Rome I Regulation. In a case in which it is intended to that the Act apply (sic), but in which the lex contractus is not English, it may be assumed that Clause 18 will make the Act apply. But it is possible to see the argument which would defeat this. If the liability of an insurer to the third party is seen as a matter relating to the contract of insurance, there is a chance that it will be seen as a contractual obligation for the purposes of the Rome I Regulation (Reg (EC) 593/2008). In this regard, the fact that the Court of Appeal is inclined to the view that, as a matter of common law private international law, a direct claim is to be characterised as a claim in tort is of no relevance: Maher v Groupama Grand Est [2009] EWCA Civ 1191 is authority on the common law, but not on the interpretation of the Regulation. That Regulation applies its own choice of law regime for matters falling within its material scope. Suppose that the law which governs the policy of insurance does not allow for the transfer of rights, or does so only in a way which conflicts with the provisions of the Act. On the face of it, it would not be possible for the Act to be applied, to override the contradictory provisions of the law which governed the contract of insurance. If it is intended that the Act nevertheless apply, it would have to be under the mechanism in Article 9 of the Regulation, that is, on the basis that the Act is an "overriding mandatory provision" of English law as law of the forum. Looking at the current wording of cl 18, it is not certain that it would pass the test as this is explained in Art 9.1, for the introductory wording of cl 18 is rather understated. It does not say, for example, that "The provisions of this Act shall be applied notwithstanding that...". Such language would, to my mind at least, make it more likely that an English judge would find (and if the European Court ever had to address the question, would be more likely to accept) that the provisions of the Act would measure up to the standard set out in Art 9.1 of the Regulation and have the effect they were evidently intended to have.

  As indicated above, the law applicable to the policy is not important. That law is relevant only to determine whether there is or there is not liability under the policy. If the third party has established and quantified the insured's liability, he can almost certainly—for the reasons that I have set out above—seek judgment under the policy irrespective of its applicable law.

    Equivalent foreign laws on direct actions. I suppose that there is no need to provide that the corresponding provisions of a foreign equivalent Act do not apply? If the idea is that in England, this Act applies to all direct actions, what would happen if a claim were to be made under an equivalent foreign law (assuming this to be the law otherwise applicable to the direct claim, as to the identification of which there is room for debate) which was more generous in some respect, whether as to the need to obtain a declaration of liability to the insured, or (perhaps more plausibly) as to limitation? I do not see anything in the Act which prevents a claimant seeking to rely on a foreign equivalent law. It will not be easy for him, not least because the jurisdictional rules which allow service out to be made without permission will not apply. But if the intention is that this Act, and no other foreign analogous law, govern direct claims in England, it may be helpful for it to say so. A slightly similar issue arose in relation to the Civil Liability (Contribution) Act 1978, in AMF v Hashim, in which the judge ventured to suggest that the 1978 applied to the case before him, but if it did not, a foreign law still might do so. The answer to this will, one supposes, depend on whether (the Serco v Lawson point, above) there are cases in which the Act has no application (as distinct from there being cases in which the Act does apply but does not give a remedy, or maybe does not give the third party as good a remedy as, for example, the law which governed the contract of insurance would have done). The Act does not, expressly at least, provide that other laws shall not be available to a claimant, or does not provide that the Act is to be exclusive of all other laws. But if it does not intend to preclude other claims, how is the conflict of laws to be resolved?

  The English courts have dealt with cases involving foreign third party measures which have provided for arbitration in England. In Through Transport v New India [2005] 1 Lloyd's Rep 67 the Court of Appeal granted a declaration that a direct claim brought in Finland against a P&I Club was in breach of an English seat arbitration clause in the Club's Rules, the effect of the declaration being to render any Finnish judgment unenforceable in England against the Club. I am not sure that issues of this type affect the Bill.


  Maggie makes a number of important comments on the Bill, but I do not think that they should be regarded as rendering the Bill unfit for purpose. Many of her points were considered by the Law Commissions. Her comments are italicised; my comments appear as annotations.

    1(a) Transfer of the insured's rights to the third party claimant arises on the double trigger of insured insolvency made manifest and the occurrence of insured liability as a matter of fact and law (cls1, and 4-7 of the Bill). The sequence of these two events is not significant for this purpose. However, cl. 1(1)(a) is likely to be far more limited in practical scope than cl. 1(1)(b): the insolvency regimes are necessarily temporary and, for example, bankruptcy and administration are both likely to end at the 12 month point. So for cl. 1(1)(a) it is a matter of chance whether the event of liability takes place during this period as appears to be required (see clauses 4 and 6 which are expressed in the present tense when speaking of the insolvency regimes). It is likely that a court would seek out the accrual of the cause of action as the critical date, as it does for the purposes of limitation so there are likely to be arguments and proceedings on this point alone. By contrast, where the sequence of events is as required in cl 1(1)(b) the field of claimants will be potentially greater (liability pre-insolvency is more likely as a matter of fact simply because the transfer of insured rights will take place automatically on the making, eg, of the Bankruptcy Order, and will at that date take in all prior acts or omissions of the insured as may give rise to claims; in addition, the insured is more likely to be commercially active prior rather than post insolvency and it is his commercial activity that commonly gives rise to liability). However, where liability has taken place pre-transfer the claimant is in a difficult position with regard to the applicable limitation period. He may be able to delay commencing his claim for some time and might be minded to do so where there is a realistic prospect of the insured entering into one of the insolvency regimes in the short term but, for example, personal injury claimants are subject to a relatively short time period, currently three years as a primary period (Limitation Act 1980, s 11). Contract based claims and other kinds of tort based claims have a more generous 6 year period. The ethos of civil procedure is to commence proceedings in a timely fashion albeit that any such proceedings are viewed as the last resort. Furthermore, claims up to £25,000, being the current Fast Track limit (CPR Part 28), tend to be managed such that trial takes place within a target of eight months. Unless the insolvency of the insured has already taken place the claim will likely be considered by a court prior to any statutory transfer of rights as envisaged by the Bill. Thus, many claimants will need to proceed without any benefit from many of the provisions of the Bill.

  The Bill operates in three cases. (1) Where the insured is insolvent at the date when proceedings are brought against him by the third party. This situation falls within clause 1(1)(a). Many of the claims likely to be brought involved dissolved companies facing long-tail liability for, eg, asbestos claims. Clause 1(1)(a) is thus of huge significance. (2) Where the insured becomes insolvent during the currency of the proceedings brought against him by the third party. As soon as that occurs, the third party has a contingent direct claim against the insurer, and the insurer can be joined to the proceedings for the purpose of declaratory relief—it may even be appropriate to stay the main action until the policy issues have been resolved. (3) Where the third party establishes and quantifies the liability of the insured, and the insured unable or fails to satisfy the judgment. Here, an insolvency procedure can be initiated, and the insured's claim against the insurer is transferred to the third party. Potential limitation problems arise in situation (3), where the third party does not initiate insolvency proceedings but simply allows the insured to bring an action against the insurer, and the insured becomes insolvent in the course of those proceedings but after the expiry of the limitation period for a claim under the policy. However, as pointed out in my original Report, the third party can be added to the proceedings under the CPR, so that he is not faced with the problem that he has to start a new action against the insurer outside the limitation period. This does remain a problem in arbitration, and so the solution is for the third party to issue institute insolvency proceedings so that he can secure a transfer in the limitation period.

    1(b) The transfer of insured rights takes place in an automatic fashion (cl 1(2)). Yet there may be multiple claimants (either one event giving rise to multiple claims or multiple events in any given insured period).The Bill does not appear to address this. It thus appears that claimants may find themselves in some kind of race with person(s) unknown in order to claim on insurance monies before any applicable insurance limit is reached. It is not clear how this would be managed.

  The Bill does not address this. It was considered in detail by the Law Commissions, and they preferred to opt for the conclusion reached in Cox v Bankside [1985] 2 Lloyd's Rep 437, namely, first past the post. There are only two options. One is first past the post. The other is that no-one recovers until all claims are resolved, and the money is then apportioned. The latter sounds fairer, but in practice it would prevent payments for many years, particular in personal injury cases where the number of potential claimants is not known. There is no easy answer, but the Law Commissions' decision to let matters lie is probably the fairest of the two possibilities.

    1(c) The Bill appears to be silent on the position where there is an annulment of say the Bankruptcy Order (Insolvency Act 1986, s.282).

  This was dealt with by the Court of Appeal in Law Society v Shah [2007] EWHC 2841 (Comm)

    1(d) There appears to be no express provision for administration other than by Order (cl 6) (Insolvency Act 1986, Part II and Sch B1).

  This matter was addressed by the Law Commissions, and it was decided that no change was needed.

    1(e) The third party claimant is only in a position to fulfil certain insurance conditions once the insured's insolvency has become manifest in accordance with the basic provisions of the Bill (cl 9). This is likely to be limited in practical application because the management of many insureds will be less efficient and less observant of insurance terms and conditions during the `twilight period' in the run up to manifestation of insolvency (see, for example, George Hunt Cranes Ltd v. Scottish Boiler and General Insurance Co Ltd [2002] Lloyd's Rep. IR 178, CA). Moreover, the occasions on which the claimant can fulfil obligations on the insured by cl 9(3) is somewhat limited.

  Agreed. This was a major weakness of the 1930 Act, and the Bill does make some attempt to deal with the problem. The issue, however, is maintaining a fair balance of the interests of the parties, and insurers should be allowed to rely upon policy conditions designed to protect them. There is a wider issue as to whether insurers should be allowed in any circumstances to rely upon conditions precedent (my view would be that they shouldn't) but, given that the law permits this in dealings between the insured and the insurer, it would be difficult to remove that right simply because the claim has been transferred to a third party.

    1(f) The anti-avoidance provisions of cl 16 will not be sufficient to prevent compromises as between insured and insurer prior to manifestation of the insured's insolvency; perhaps this is intentionally so. The anti- avoidance mechanisms of the Insolvency Act 1986, most notably sections 238, 339 and 424, may not be adequate. There is some potential for a claim, albeit at considerable cost, to seek and obtain a freezing order (CPR Part 25, and see on this Normid Housing Assoc Ltd v. Ralphs (No 2) [1989] 1 Lloyd's Rep. 274).

  Strongly agree. This is unsatisfactory, but there is no obvious solution other than perhaps the possibility of challenging a settlement on the basis that it was reached in bad faith and with an intention to deprive the third party of a valid source of funds.

    1(g) The information a claimant would need in practice would extend to the potential for competing claimants under the policy; this is not listed in the current Bill, sch 1. Claimants need to be able to estimate the amount available under the policy. It is not clear whether the obligation to give information is a once only obligation or whether it continues as it would under CPR Part 31. The penalty is not clear; is it intended that contempt proceedings are possible for knowingly false statements?

  Agreed, although this would be useful rather than essential as it only affects a minority of cases.

    2.  The provisions create a perverse incentive in forcing an insured defendant into one of the insolvency regimes. A personal injury claimant, for example, would have difficulty doing so prior to Judgment or an Order for interim payment (CPR Part 25) but could do so at that stage. Courts may be faced with difficult decisions on petitions to wind- up or make bankrupt. Such claimants would also have incentive to vote in favour or a CVA/IVA simply to bring about the trigger of transfer of rights. There is some time pressure on a claimant in this regard given that he would be subject to a limitation period (presumably 6 years as contract) from the date of his own judgment (cl 12 of the Bill).

  This is plainly right, but matters will not inevitably get to that stage. If the third party obtains a judgment against the insured which the insured fails to satisfy, the third party can present a winding up petition or institute some other relevant insolvency provision. That often will be enough to make the insured pay if it can, or cause it to make a claim against its liability insurer if it can't. But if there is no payment, the third party—just like every other judgment creditor—has the right to force an insolvency procedure, the only difference being that the third party is a secured creditor in the event that he can fulfil the requirements for a claim against the insurer

    Moreover, it is a basic premise of insolvency law that existing rights and obligations as between insolvent and third parties are not altered merely by the fact of insolvency. The 1930 Act is one exception to this and there are others of course, primarily preferential creditors under Sch 6 of the Insolvency Act 1986. These exceptions are usually the product of social and or political desires. They need however, to be carefully considered. It is also a basic principle of insolvency law that the entirety of the insolvent's assets should be made available for the creditors as a group and in accordance with the statutory scheme of distribution. Little objection is likely where insurance monies on property fall into the assets of the insolvent on the loss or destruction of the insured property: one asset is merely replaced by another. Liability insurance differs in that although the policy is an asset it serves to indemnify for a loss/liability rather than to replace a lost asset. The Law Commission's standpoint and thus the stand point taken in the Bill is to respect the philosophy of the 1930 Act. Thus, there has been no debate on the position of liability insurance more generally. There has been no consideration of whether it might be right to remove the requirement of any manifestation of insured insolvency as a precondition for transfer of certain rights to third parties. As is well known the 1930 Act came into being in order to remedy a perceived anomaly displayed in Re Harrington Motor Co, ex p Chaplin [1928] Ch 105 and in Hoods' Trustees v Southern Union Ins Co of Australasia Ltd [1928] Ch 793. The position of motor accident claimants is now radically different, being the product of discrete reform from 1930 and more recently the product of EU Directives. The motor claimant is now the exception rather than the classic example of the norm; he has a direct right of action against a liability insurer regardless of the insured's financial position. This kind of claimant does not need to rely on the provision of law first developed for his benefit. The current reform has not dealt with the larger issue of whether review more generally should take place; specifically whether it is right that motor claimants should be treated as a distinct group, and whether it is right that all other types of claimants are unable to make direct claim on a liability insurer unless the insured is insolvent. It is hard, for example, to justify the position of, say, a postman injured whilst on his rounds by a speeding motorist who is able to make direct claim on the liability insurer regardless of the solvency of the motorist, but who if injured when attempting to deliver post as he falls into unlit excavations around a householder's property is unable to make a similar claim unless and until the householder is insolvent.

  Agreed absolutely, but this matter was considered and rejected by the Law Commissions. Motor claimants have a special position as a result of the five EC Motor Insurance Directives and there is a strong case for extending that regime to employers' liability claims (albeit for domestic rather than single market reasons). But reopening that wider issue now would simply kill the Bill. What the Law Commissions have produced is perfectly workable.

January 2010

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