The Third Parties (Rights Against Insurers) Act 2010 is not retrospective

The Third Parties (Rights against Insurers) Act 2010 came into force on 1 August 2016 and was enacted to rectify perceived defects in the Third…

Mrs Redman (suing as widow and administratix of the estate of Mr Redman, deceased) v (1) Zurich Insurance PLC (2) ESJS1 Limited (formerly known as the Humber Electrical Engineering Co Limited) [2017] EWHC 1919 (QB).

Background

The Third Parties (Rights against Insurers) Act 2010 (‘the 2010 Act’) came into force on 1 August 2016 and was enacted to rectify perceived defects in the Third Parties (Rights Against Insurers) Act 1930 (‘the 1930 Act’). The 2010 Act preserves the fundamental rule that allows a statutory transfer of the insured’s rights arising under a policy of insurance to a third party. The 2010 Act applies to anyone with a claim against an insolvent person or more normally an offending dissolved Company.

The 2010 Act is generally perceived to be more beneficial for a claimant. Under the 1930 Act, a claimant would first have to restore the Company to the Register, then establish the liability of the insured/Company by securing a judgment and then issue proceedings against the insurers. The situation is streamlined under the 2010 Act, as the claimant can skip the restoration of the Company and the need to bring separate proceedings against it.

Legal point in issue

In Redman, the Court considered whether the 2010 Act applied retrospectively to claims where otherwise the remedy would have been under the less attractive 1930 Act. The transitional provisions make it clear, that where, before the August 2016, the following two conditions apply, the 1930 Act applies:

  1. 'The relevant person has incurred a liability against which that person is insured under a contract; and
  2. The person subject to such a liability has become a ‘relevant person’.

The Defendants’ insurers’ argument prevailed in that the 1930 Act applied in this case as the Court held that before the coming into force of the 2010 Act, the Company was already a ‘relevant person’ within the meaning of the 2010 Act and it had already incurred its liability to the claimant. The Company was wound up voluntarily in 2008 and was dissolved on the 30 June 2016. The liability arose when the claimant sustained an actionable injury – this was before the date the 2010 Act came into force.

The date when the liability arose was not (as was argued by the claimant) the date of the judgment or compromise settlement (which in Redman would inevitably have been after the 2010 Act had been enacted), but the date when the claimant had an actionable claim i.e. when he suffered harm. This was clearly before 1st August 2016. As such, on these facts, the claim based upon the 2010 Act was struck out and the claimant will now have to proceed under the 1930 Act.

The judgment also confirms that only the 1930 Act or the 2010 Act can apply at any one time. Additionally, the 2010 Act does not apply retrospectively; the Judge making it plain that if retrospective application had been Parliament’s intention then it would have been a straightforward matter to draft the 2010 Act differently. It had not.

Comment and impact

This is therefore a useful judgment, clarifying that to rely upon the 2010 Act either the Company must have become a relevant person after 1 August 2016 or the liability (meaning the date of actionable injury) must have been after 1 August 2016.

Whilst in Redman the facts were clear and the claimant’s spouse had died in 2013, the application of the Acts will be problematic in occupational disease claims where the actionable injury date is not clear. In long tail claims, due to latency a claimant’s cause of action is complete many years after the negligent exposure and only once damage or harm has occurred. Practitioners will need to consider whether the harm was sustained when the illness first provided symptoms or was it some other time.

Mesothelioma provides an example of the problem. In the Trigger Litigation Mr Justice Burton’s obiter comments were that the date of harm was five years before symptoms arose – this, he determined was the date when the tumour had developed it’s own blood supply and had reached the ‘point of no return’.  In brief, the tumour could not be cured by the body’s own defence mechanisms. However the Court in that litigation considered only when injury occurred for the purposes of construction of an indemnity clause and not when the cause of action was complete.

It is uncertain exactly when a court would consider the cause of action is first complete. In Bolton MBC v Municipal Mutual [2006] EWCA Civ 50, the date of harm was held to be ten years before symptoms. The Court in Redman was not asked to determine the five – ten year issue.

In practice, this means that the 2010 Act is unlikely to have any applicability to mesothelioma claims until symptoms appear in 2021 or 2026 (assuming the companies being pursued were dissolved before 2016).

For asbestos related lung cancer if the ‘point of no return’ is the date when the cause of action is complete then that is a date yet to be determined but it probably will not be the five or ten year period applicable to mesothelioma. For other asbestos related illnesses, it will also be a matter for argument.

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