Third Parties (Rights Against Insurers) Act 2010 - BAE Pensions v RSA

Judge determines issues under the Third Parties (Rights Against Insurers) Act 2010

The Third Parties (Rights Against Insurers) Act 2010, which came into force on 1 August 2016,  provides that a third party can bring a single action against the assured and its liability insurers, rather than bringing an action against the assured and then seeking to enforce it in separate proceedings against the insurers (as was the case under the 1930 Act). As a result, the court can decide the issue of coverage under the policy as a preliminary issue and so, if there is no coverage, an expensive trial on the assured’s liability can be avoided.

One of the issues in this case was whether the court has jurisdiction to hear a claim where cover is disputed by the insurer.

The insurer argued that it was entitled to rely on a clause in the policy which provided that there would be no cover if the insured was aware of the harmful event when the policy was taken out (which it argued was the case here). Section 2(1) of the 2010 Act provides that where a person "claims to have rights under a contract of insurance by virtue of a transfer under section 1 but has not yet established the insured's liability which is insured under that contract" (emphasis added), he/she may bring proceedings against the insurer. The insurer's argument was that section 2(1) was not engaged because it did not provide cover. That argument was rejected by the judge. She held that section 2(1) is engaged "even where there is a potential dispute as to whether or not there is the appropriate cover under the policy".

The judge said that if a claim was made against an insurer which was "simply unarguable", the proceedings could be struck out. Nor could it be said that the insurer had no right to step into the insured's shoes to defend the underlying claim: "if [the insurer] is joined as a Defendant in these proceedings, clearly it is entitled to make such submissions and call such evidence as it wishes to make in response to the claims by the Claimant". The insurer can either decline to conduct a substantive defence of the underlying claim by the claimant (on the basis that there is no coverage) or seek declarations and/or have preliminary issues determined in respect of the coverage issue.

The other issue in the case was whether the English court has jurisdiction to hear the claim under the 2010 Act where the policy is governed by the law and jurisdiction of another country. Here, the policy provided for both the exclusive jurisdiction of the French courts and French law and also for arbitration. The judge did not determine which provision applied in this case, and instead concluded that the coverage dispute would be covered by one of them. Accordingly, the English court did not have jurisdiction to hear the coverage issue. The judge joined the insurer to the English proceedings but then stayed proceedings relating to the insurer's liability to the insured and/or third party claimant (she granted a stay just in case she was wrong on the point and this part of the proceedings became time-barred in the meantime).

COMMENT: The conclusion of the judge on the first point (coverage) is supported by prior caselaw under the 1930 Act and textbook commentary, although this is the first time that the issue has been confirmed in relation to the 2010 Act.  However, the conclusion on the second point (jurisdiction/choice of law) might be contrasted with the recent CJEU decision in Assens Havn v Navigators  which was handed down the day before this judgment), where it was held that a third party claimant bringing a claim under the Danish equivalent of the 2010 Act was not bound by the jurisdiction/choice of law clause in the insurance policy.