Yet another gripping headline to draw in the reader of this blog … but despite the arcane title and multiple brackets these new regulations are worth knowing about. What they’ll do when implemented is to rectify a barrier to rights of recovery after an insurance policy covering a dissolved, insolvent or otherwise no-longer-existing insured has responded to a third party’s claim.
The point of the third party rights mechanisms (originally in an Act from 1930) is to enable a third party claimant to access the insurance cover of a dissolved insured in order to recover sums claimed. The process was simplified by the 2010 Act, as explained last year in this blog about Redman v Zurich. Despite the raft of changes in 2010, the regime did not make special provision for how the insurer meeting the claim would be able to exercise rights of recovery against any others who might also be liable.
The 2010 Act removes the need for the claimant to have to restore the company to the register before claiming against the insurer. This means that insurers, rather than claimants, would now be looking to restore companies to bring proceedings in their name. The problem is that if the claim is made some time after dissolution of the company, the insurer is completely unable, under company law, to restore the company any later than six years after dissolution in order to bring contribution proceedings in its name. [The insurer could not get round the time limit by arguing that the contribution proceedings should be regarded as a claim for personal injuries, as it has long been held that they cannot be classified as such (see for example Wagenaar v Weekend Travel, a QOCS case in the Court of Appeal).]
The new draft regulations with the snappy title above will remove these restrictions and should therefore be welcomed. The Government’s explanatory memorandum explains the changes in the context of asbestos litigation (an area in which there is frequently likely to be much longer than six years between dissolutions and injury claims being made):
“Since it is now unnecessary for the claimant to restore the company to the register as a preliminary step to recover damages, an insurer of the company can no longer rely on the claimant having done this and would have to make its own application to restore the company. Where the personal injury was caused as a result of exposure to asbestos in particular, the company will often have been dissolved many years before the claim is made, so an application by the insurer to restore the company to the register will be out of time due to the six year time limit … these Regulations [resolve] this problem by adding a further purpose for which an application to restore a company may be made at any time: namely, for the purpose of an insurer bringing proceedings against a third party in the name of that company in respect of that company’s liability for damages for personal injury.
The relevant provision of company law (s1030 of the Companies Act 2006) will be amended by the regulations in the following way, set out in red below.
1030 When application to the court may be made
(1) An application to the court for restoration of a company to the register may be made at any time for the purpose of–
(a) bringing proceedings against the company for damages for personal injury;
(b) an insurer (within the meaning of the Third Parties (Rights Against Insurers) Act 2010) bringing proceedings against a third party in the name of that company in respect of that company’s liability for damages for personal injury.
These draft regulations were laid before Parliament on 28 June 2018 and will take effect in a matter of weeks. We shall provide details of the commencement date as soon as it is clear.
Authored by Alistair Kinley, director of policy & regulatory affairs