Insurance Contracts CP - Law Reform Commission

debts of the insured. The section 62 of the 1961 Act represents a policy decision to separate
insured debts from insolvency proceedings. Although it does not expressly confer a positive
right of action on those entitled to an award of damages against the insured, it has been
decided that this section gives an entitlement to an injured party to sue the insurers of a
bankrupt party to ensure compliance with the section. 25
9.16 While section 62 is clearly very useful in cases of deceased or insolvent insureds, and recent
case-law illustrates that there are other more indirect routes whereby a third party creditor may obtain
access to insurance policy proceeds, 26 such piecemeal solutions, especially when no direct right of action
or implementing machinery is included, do not create the necessary clarity and certainty required in this
difficult area of the law.
9.17 The Commission notes that in the United Kingdom the Contracts (Rights of Third Parties) Act
1930 was much criticised in the way in which it operated in the context of insolvency. The Commission
speculate on whether section 62 of the Civil Liability Act 1961, a model of brevity, has had greater
success in Ireland than the 1930 Act has had in the United Kingdom. Criticism of the 1930 Act was
expressed by the Law Commission:
―owing to the way the 1930 Act has been applied by the courts, third parties are often not
assisted by it at all or are unnecessarily required to expend substantial time and money
enforcing their rights.‖ 27
9.18 The Third Parties (Rights against Insurers) Act 2010, repeals the 1930 Act but builds upon the
1930 Act insofar as both Acts transfer to a claimant an insured‘s rights against an insurer, once the
insured has been shown to be both liable on the claim and insolvent within the terms of the legislation.
The most important reform effected by the 2010 legislation relates to the possibility that the claimant can
commence one set of proceedings so as to establish the insured‘s liability and the insurer‘s obligation to
indemnify the claimant. The 2010 legislation also removed the third parties‘ requirement to restore a
dissolved company to the register of companies before being able to sue it. The enhanced information to
be disclosed is also much expanded. However, the failure to amend the insurer‘s defences provisions in
some significant ways has attracted criticism. 28
9.19 The Commission has a limited amount of information on how section 62 of the Civil Liability Act
1961 operates. The Commission notes that in the United Kingdom the Contracts (Rights of Third Parties)
Act 1999 did not render the Third Parties (Rights against Insurers) Act 1930 redundant: 29 indeed, the
recent passage of the Third Parties (Rights and Insurers) Act 2010 suggests that there may well be a
need to review existing Irish legislation having the same effect.
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26
27
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29
Citing Dunne v PJ White [1989] 1 ILRM 803.
Section 62 has been recently considered in one of a series of decisions arising out of product liability claims
resulting form the dioxin pigmeat contamination controversy in late 2008. In Millstream Recycling Ltd v
Companies Acts [2009] IEHC 571, application for holding a meeting of creditors under section 201 of the
Companies Act 1963 was brought, the creditors in question being purchasers of contaminated animal feed
from the applicant company. These creditors were divided on whether to agree to a composition which would
have averted the winding up of the applicant company (and thus short-circuit the application of section 62), the
creditors being compensated pro rata from FBD product liability insurance. It is clear that section 201 of the
Companies Act 1963 will allow the court to hear both the creditors and the insurer even thought the creditors
are clearly not party to the insurance contract. Laffoy J ordered a meeting be held under section 201 of the
1963 Act.
Law Com No. 272, 31 July 2001, para 1.5. For a recent decision see William McIlroy (Swindon) Ltd v Quinn
Insurance [2011] EWCA Civ 825.
See Law Commission Report 272, Part 5: Hemsworth [2010] LMCLQ 376.
See Merkin, in Lowry and Rawlings, Insurance Law, Doctrines and Principles 2 nd ed (Hart 2010) at 344-352 for
an account of the 1930 Act.
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