Insurance Law Monthly

An employee who is injured at work and who obtains a judgment against his insolvent or struck off employer is entitled to seek to enforce that judgment by bringing an action against the employer’s liability insurers under the Third Parties (Rights Against Insurers) Act 1930 (now 2010). Under the 2010 Act there is an obligation on the employer and any relevant third party (eg, a broker) to provide insurance information to the employee so that it becomes possible for the employee to trace and bring an action against the relevant insurer. However, serious problems remain: tracing is not always easy; and an employee has no recourse if the employer is uninsured. These matters are addressed in a Consultation Paper issued by the Department of Work and Pensions in February 2010.

The Third Parties (Rights Against Insurers) Act 2010 received the Royal Assent on 26 March 2010, having sailed through Parliament unamended from the form in which it was presented in November 2009. The 2010 Act was the result of Law Commission Report No 272 published in 2001, which highlighted the shortcomings of the existing legislation, the Third Parties (Rights Against Insurers) Act 1930, and made various recommendations for its reform. The 2010 Act closely follows the Law Commission’s 2001 draft bill, but has updated it to reflect changes in insolvency law in the intervening period. The Act is likely to come into force in about a year’s time, and will apply to all cases other than those in which both the insolvency of the assured and the occurrence of the event giving rise to liability occur after the appointed day.

Insurers frequently seek to exclude or restrict their liability where there is other insurance in place. Three devices may be used to achieve this: (1) a clause which removes all liability in the event that some other insurance exists; (2) a clause which relegates the policy to an excess cover only in the event that some other policy exists; and (3) a rateable proportion clause, under which the insurer is liable only for its own share if some other insurance exists. Difficulties arise where each of the policies involved contains one or more of these clauses: which of the clauses is to be given primacy? In National Farmers Union Mutual Insurance Society Ltd v HSBC Insurance (UK) Ltd [2010] EWHC 773 (Comm) Gavin Kealey QC, sitting as a Deputy High Court Judge, was faced with a novel situation as far as the English courts are concerned: a conflict between an excess clause in one policy and a rateable proportion clause in the other.

The Court of Appeal in Quinn Direct Insurance Ltd v The Law Society of England and Wales [2010] EWCA Civ 805 has upheld the first instance decision of Peter Smith J, [2010] Lloyd’s Rep IR 336, refusing to allow the appellant liability insurers the right to obtain all of the books and records of their assured in order to determine whether they might have a fraud defence to future claims.