The Third Parties (Rights against Insurers) Act 2010 (the “2010 Act”) came into force on 1 August 2016 and replaced the Third Parties (Rights Against Insurers) Act 1930 (the “1930 Act”).

The previous 1930 Act had enabled a third party to bring a claim directly against an insurer where the insured had become insolvent, however a claimant had to (i) restore a dissolved company to the register of companies and obtain the leave of the court to allow proceedings to be commenced; (ii) obtain judgment against the insured; and (iii) commence separate proceedings against the insurer.

In Official Committee of Unsecured Creditors v. Baldwin (In re Lemington Home for the Aged), 659 F.3d 282 (3d Cir. 2011), the Third Circuit Court of Appeals held, among other things, that the “deepening insolvency” cause of action, which the Third Circuit previously recognized in Official Committee of Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340 (3d Cir. 2001), remains an independent cause of action under Pennsylvania law.

Background

Section 503(b) of the Bankruptcy Code delineates categories of claims that are entitled to elevated priority as “administrative expenses.” Under section 503(b)(3)(D), administrative expenses include “actual, necessary expenses” incurred by a creditor, indenture trustee, equity holder, or unofficial committee “in making a substantial contribution” in a chapter 11 case.