A statutory instrument has recently been passed providing that the Third Parties (Rights Against Insurers) Act 2010 will, finally, come into force on 1 August 2016, some six years after it was first passed.
The act will replace and, in general, streamline the procedures put in place by the Third Parties (Rights Against Insurers) Act 1930. Perhaps the two most significant changes brought about by the 2010 Act are:
The Third Parties (Rights Against Insurers) Act 2010 (the 2010 Act) will finally come into force from 1 August 2016.
The Act improves the rights of claimants who have a claim against an insolvent company or individual to directly claim against the insolvent party’s insurer.
In particular, the 2010 Act brings about the following important changes:
The 2010 Act has now been updated by regulations (the Third Parties (Rights against Insurers) Regulations 2016) to reflect changes in insolvency law. Accordingly, the long-awaited 2010 Act will finally come into force on 1 August 2016.
It will be recalled that the 2010 Act is intended to make it easier for third party claimants to bring direct actions against (re)insurers where an insured has become insolvent. The key changes coming in are as follows:
1 April 2016 will see the insolvency profession fall in line with other civil litigation as the exemption which enabled the recoverability of CFA success fees and After the Event (ATE) insurance premiums from the unsuccessful party to litigation comes to an end. This recoverability was abolished in other civil litigation in April 2013, principally as one of a number of changes intended to control and reduce the costs of civil litigation.
Draft regulations were laid before Parliament on 25 February 2016 to amend the Third Parties (Rights Against Insurers) Act 2010
The Act, when it comes into force, will make it more straightforward for claimants to cut through directly to insurers when policyholders become insolvent. It has been six years since the Act was passed. These proposed amendments are another step on what has been a slow road towards bringing the Act into force.
The Third Parties (Rights Against Insurers) Act 2010 is a step closer to coming in to force with the publication of draft Regulations whose aim is to correct omissions in the Act. Once in force the Act will improve the position of claimants who are bringing actions against insolvent defendants and looking to recover from those defendants' insurers.
As reported in Reed Smith’s March 2015 client alert, insolvency practitioners currently enjoy an exemption from the provisions of Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO).
http://www.bailii.org/ew/cases/EWHC/Ch/2015/3721.html
Two insurance intermediaries entered into administration. Although heavily insolvent, they had significant funds held in client accounts. Those funds represented insurance premiums collected from customers but not yet paid on to the insurers. The issue therefore arose as to whether the insurers, the customers or the unsecured creditors of the intermediaries were entitled to those funds.
On 17 December 2015, the Ministry of Justice made a final decision to end the Insolvency Litigation exemption from the 2012 Legal Aid, Sentencing and Punishment of Offenders Act (LAPSO) (see Written Statement here). Successful claimants will no longer be able to recover the success fee on a Conditional Fee Agreement (CFA) or After the Event insurance (ATE) premium from the opposing party for those CFAs entered into or ATE obtained from 1 April 20
The government has today announced that the insolvency exception to the Jackson reforms will come to an end in April next year. This means that CFA success fees and ATE insurance premiums will no longer be recoverable in proceedings brought by liquidators, administrators, trustees in bankruptcy, and companies in liquidation or administration.