Lloyd's Maritime and Commercial Law Quarterly
THE THIRD PARTIES (RIGHTS AGAINST INSURERS) ACT 1930 IN A MODERN CONTEXT
Keith Michel*
The Third Parties (Rights Against Insurers) Act 1930 came into force over 50 years ago to remedy an injustice in the field of motor insurance. It has little or no contemporary relevance in that field, but remains the only statute governing the relationship between insured, insurer and third party which is applicable in the context of modern insurance claims.
It is however becoming increasingly clear that an understanding of the Act’s provisions and likely application is necessary in the commercial and maritime field and, in particular, to enable Protection and Indemnity Insurance Associations (“P. and I. Associations”) to ascertain to what extent, under the terms of their rules of entry, valid defences are available to defeat third party claimants or judgment creditors of the insured shipowner. This is particularly so as a result of the unfortunate increase in the number of shipping bankruptcies in recent years which has resulted in a significant increase in the presentation of claims to P. & I. Associations directly by third parties.
P. & I. Associations and other liability insurers have often tended to shy away from strict insistence on the terms of the Act or reliance on available exceptions or defences under the relevant Rules or contract of insurance. Frequently policy or commercial considerations militate against enforcement of the rights of the insurer against its former insured in whose shoes the third-party claimant seeks to advance the claim through operation of the Act. It is suggested however that there are many cases where proper defences can be taken and the scope of any settlement with the third party significantly reduced or avoided.
Injustice to be remedied
The Act was passed to remedy a specific injustice in the common law position, accentuated by the increasing number of motor accidents during the 1920s. Cases arose in which injury or death to a third party was caused in a road traffic accident, but in which the injured third party (or his estate) was unable to take full (or any) benefit of the offending motorist’s liability insurance, because the motorist either before or after the accident became bankrupt.
On bankruptcy the proceeds of the liability insurance would be paid to the trustee in bankruptcy for distribution to creditors at large, and to the obvious detriment of the injured party. This injustice was first judicially recognized by the Court of
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