Third party rights

Variation of the assured’s rights on insolvency

The Third Parties (Rights Against Insurers) Act 1930 (‘the 1930 Act’) is designed to protect a claimant against an assured from the consequences of the assured’s insolvency. At common law, the proceeds of any liability policy held by the assured which covers the claimant’s claim against the assured form a part of the assured’s general assets and thus fall to be distributed amongst all of the assured’s unsecured creditors of whom the claimant will be just one. The 1930 Act allows the claimant to seek direct payment from the insurers, thereby preventing other unsecured creditors from obtaining any rights over the insurance fund. The 1930 Act was originally passed to bolster the introduction of compulsory motor vehicle liability insurance in the Road Traffic Act 1930, although since 1934 the victim of a negligent driver has had an alternative mechanism under the Road Traffic legislation itself to ensure that he receives payment from the insurers. The 1930 Act was nevertheless retained, and applies to all liability covers. The 1930 Act has proved to be defective in numerous respects, and is due to be replaced by a new regime proposed by the Law Commission in 2002, once legislative time becomes available. In the meantime the 1930 Act, in what is more or less its original form governs the position. Centre Reinsurance International Co and another v Curzon Insurance Ltd [2004] EWHC 200 (Ch), [2004] Lloyd’s Rep IR (forthcoming), a decision of Blackburne J, raised a number of important questions on the application of the 1930 Act to third party claims where the policy terms restrict the ability of the assured himself to make claims. The most important of these are considered in the following paragraphs.