The purpose of the Third Parties (Rights Against Insurers) Act is to confer on third parties rights against insurers of third party risks when certain events regarding the solvency of the insured occur. In the case of a company it applies when a winding-up order is made, the company enters administration, a resolution for voluntary winding up is passed, a receiver or manager of the company’s business or undertaking is appointed, the holder of a debenture secured by a floating charge either personally takes possession of property subject to that charge or appoints an administrative receiver to do so, or where a voluntary arrangement is approved. In the case of an individual it applies where a bankruptcy order or insolvency administration order is made or a composition or arrangement is entered into with creditors. The Act covers third party liabilities which are incurred both before and after the events listed above. Such a liability could occur, for example, where a vehicle belonging to the insolvent was involved in an accident and an insurance claim arising from the accident was unresolved at the date of the bankruptcy or winding-up order. In this chapter, all section references are to this Act except where otherwise stated.Notes: [s1]
The Act was introduced at the same time as the Road Traffic Act 1930, but it has a general application. It prevents the injustice of an insolvency office-holder being able to claim under an insurance policy for the estate, while leaving the injured party as an unsecured creditor with no special interest in the insurance money. It does not apply, however, to re-insurance contracts.
Section 3 of the Act provides that any settlement made or agreed between the insurer and the insured after the occurrence of the events listed in paragraph 79.1 shall not operate such as to defeat or affect the rights transferred to the third party by this Act: those rights shall remain as if such agreement, etc had not been made. For example, if a vehicle on hire purchase was stolen and damaged, while insured by the insolvent in accordance with the terms of the hire purchase agreement, the hiring owner can deal directly with the insurance company over the claim, irrespective of whether the value of the claim had been agreed with the insolvent.Notes: [s3]
In order to succeed in an action against the insurer, it is necessary for the third party first to establish a claim against the insolvent. Both the existence of the claim and the amount of the liability must be established either by legal action, arbitration or agreement.
The Act imposes a duty on the bankrupt, debtor, the insolvent’s personal representative (for a deceased debtor) or the company and, as the case may be on the trustee, liquidator or other insolvency office-holder to provide such information as the third party may reasonably require for the purposes of ascertaining whether any rights have been transferred to and vested in him by the Act and for enforcing any such rights. This includes a duty to allow all contracts of insurance, receipts for premiums and other relevant documents in the possession or power of the person on whom the duty is imposed to be inspected and copies of them to be taken.
Following the decision of the Court of Appeal in Re: OT Computers Limited (In Administration)  All ER (D) 361 (May), the court held that a third party claimant needs to know whether the person against whom he/she is making a claim is insured and in what terms (including whether they hold limited or no insurance), and that this disclosure requirement under Section 2 of the Third Parties (Rights Against Insurers) Act 1930 applies even before the third party has established liability. This means that the official receiver is required to disclose (if requested) the existence/non-existence of insurance cover, with appropriate details of the cover where applicable, in every case.
Where the official receiver has been asked to disclose details of the insurance cover under the terms of the 1930 Act he/she should notify the insurer of the request. Should the official receiver be approached to provide information after the appointment of an insolvency practitioner as office-holder, he should inform the third party that the information should be requested from the insolvency practitioner.
Notes: [s2 Third Parties (Rights Against Insurers) Act 1930]
Where the official receiver becomes aware of legal proceedings being brought by a third party to establish a claim against the insolvent, he should check the terms of the insurance policy. It is extremely likely that it is a condition of cover that the insurer is notified promptly of any circumstances which might give rise to a claim. Notification of the proceedings will give the insurer the opportunity to become a party to the defence and of disclosing the existence of the policy to the claimant. Failure to notify the insurer of the proceedings could invalidate the insurance cover and leave the official receiver liable in respect of damages.
There is a legal obligation on persons involved in a road accident to exchange insurance details. Where a motor insurance policy is in the official receiver’s possession, he should make it available to the insolvent to enable him to comply with any obligation under this Act. It should be noted that whilst the official receiver is not legally obliged to do so, where the request for information is directed to the official receiver he may provide the insurance details directly to a third party involved in a road accident subject to obtaining the insolvent’s consent.Notes: [s154]
In the event, however, that the official receiver receives a request to disclose correspondence or documents which have been generated by or obtained from the insolvent’s insurers in the course of the proceedings, Technical Section at HQ London should be contacted prior to any such disclosure being made.Notes: [formB/L39.03(L)]
Company officers and bankrupts have a statutory duty to co-operate with the official receiver following the making of a winding-up or bankruptcy order. It is envisaged that any information, insurance documents etc needed to enable the official receiver to comply with any request received from a third party in accordance with the Act, will be requested under the provisions of these sections if not otherwise held by the official receiver.Notes: [s235 or 291 Insolvency Act 1986]
Headquarters has received legal advice that it would not be a proper use of the private examination provisions of the Insolvency Act to compel a bankrupt or company officer to produce information, documents, etc simply for the purpose of assisting a third party. Accordingly the official receiver should not generally apply for a private examination to assist a third party in progressing a potential insurance claim unless doing so is likely to result in some benefit to the estate. Such benefit would occur where there were assets to distribute and the dividend payable to the other creditors could be increased by removing a large claim which would be borne by the insurers (the insurer would not subrogate to the claim after payment of it). The official receiver should minute Technical Section at HQ London if he considers that the circumstances of a particular case merit a private examination. Any such application should be brought by the Official Receiver in his capacity as liquidator or trustee (or other relevant office-holder), because it is in that capacity, rather than as official receiver as such, that the duties to third parties under the Act arise. The official receiver should not apply for a public examination to obtain information for a third party, because the public examination provisions are there to assist the official receiver with his statutory duties as official receiver, not to enable him to fulfil a duty to a third party in the capacity of liquidator or trustee.Notes: [s236 or 366 Insolvency Act 1986] [form B/L39.03(L)] [s133 or 290 Insolvency Act 1986]
(amended March 2012)
If, prior to an action being commenced to establish a claim under the Act, a company has been dissolved following winding up, the third party will first need to apply to the court to have the company restored to the register of companies, it being impossible to establish a claim against a company which no longer exists. Where the claim relates to a fatal accident or personal injury, an action can be brought at any time: otherwise the application must be made within six years of the dissolution (see chapter 38).
Notes: [s1030 CA2006]