Third Parties (Rights against Insurers) Bill [HL]

My Lords, over the years, many of us have been critical, if not highly critical, of the Government and previous Governments for failing to implement, or for unduly delaying the implementation of, worthwhile Law Commission reports asked for by the Government of the day. It is a pleasure, therefore, to congratulate this Government on putting forward in the gracious Speech two Bills which are intended to implement Law Commission reports—the Bribery Bill and this Bill. Of course, they have to be dealt with somewhat differently as the Bribery Bill may well produce more controversy and difficulty. I share with the noble Lords, Lord Hunt of Wirral and Lord Goodhart, the concern that, despite the points I have made, it has been an eight-years—or is it eight-and-a-half years, as the noble Lord, Lord Goodhart, said?—since the Law Commission report on the subject of third party insurance was published. Like the two noble Lords, I can see the tremendous advantage of the procedures allowed for by the new Law Commission Act, which is shortly to come into effect, and how helpful that will be. In 1930—I was not quite born then—there were not many cars on the roads; certainly far fewer than now. However, there had been a sufficiency of unfortunate accidents created through the fault of motorists to make Parliament feel that it should be made compulsory for motorists to take out certain kinds of liability insurance. One should commend our forebears in Parliament 80 years ago for requiring that compulsion and for their foresight in introducing the third party insurers Act. They realised that not only would there be many more cars in future but that they would be driven by people who were not necessarily well off—as, no doubt, car owners were in the early days of motor cars. As the law then stood, based on the common law of privity of contract—a phrase of which I am fond but which I have not heard from noble Lords who have spoken so far—no liability insurance was enforceable directly by the third party against the insurer. Therefore, if the insured was insolvent, the third party had no right to claim direct against the insurance company and was left with merely a right to share with other creditors the modest assets that might be available out of the administration of the insured’s insolvent estate. For the injured person—or the relatives of a sadly deceased person killed by a motorist—the 1930 Act was a godsend; it enabled the third party to stand in the shoes of the insolvent insured and claim direct against the insurance company. Following employers’ liability insurance becoming compulsory in 1969, employees had the benefit of the 1930 Act to claim direct against an employer’s insurers when the employer was at fault and was insolvent. I recall raising this matter in the excellent presentation that the Minister and Mr Hertzel gave last week and I know that they are fully aware of the existence and value of the Motor Insurers’ Bureau. The 1930 Act was never any use, of course, if someone was uninsured or their insurance was out of date, not paid for and so on—there was no question of these rights emerging—but the insurance companies, valuably, got together to put funds into what became known as the Motor Insurers’ Bureau. Thereafter, in relation to both uninsured motorists and the hit-and-run driver—sometimes known as the untraced motorist—there would be a fund against which an injured party would be able to claim. It is an informal scheme based not on statute but, as I understand it, on agreement between the Ministry of Transport and the insurance companies which deal in this field. I ask the Minister whether he is satisfied with the operations of the Motor Insurers’ Bureau and whether, given the Employers’ Liability Act and the fact that some employers are not insured when they should be by law, there is a need for a similar arrangement in the field of employers’ liability. Nearly 80 years have passed since the introduction of the statutory exception to the privity of contract principle that we are talking about today. Deficiencies in the 1930 Act have become noticeable—especially the requirement, to which the Minister referred, that the third party must first establish the existence and amount of the insured’s liability before proceeding against the insurance company. Fortunately, under the Bill, which follows the Law Commission’s recommendations, one set of proceedings will suffice and there is no need for multiple proceedings and multiple costs. Under the 1930 Act, as the third party stood in the shoes of the insured, it was not surprising that, normally speaking, any defence that could have been raised against the insured could be raised against the third party. I am glad to say that there are various exceptions in, I think the Minister said, Clauses 8 to 10 and 14, which give more favourable rights to the third party than to the insured. He also made the valuable point that, as insolvency law has changed, various arrangements, including voluntary ones, can be made in those circumstances and the new Bill will cover those arrangements. It will also cover matters of motor vehicle insurance and employers’ liability insurance that are not compulsory, such as health insurance and legal expenses insurance, which many of us are encouraged to take out even though it is not a requirement of the law. The Law Commission—which I put first above the Government for a reason that I shall mention in a moment—is to be congratulated on providing the Government with a comprehensive report on this rather technical procedure. I welcome that. I hope the Minister will not mind my raising an issue that he may consider irrelevant to this debate. I am concerned that the Law Commission’s more general and substantial report, Insurance Contract Law: Misrepresentation, Non-Disclosure and Breach of Warranty by the Insured, the release of which we look forward to next week, may be put away on a very high shelf by the Government, especially as we are coming towards the close of this Parliament before a general election. That would be most unfortunate. Perhaps I may put down this marker: whether the Government have a short or a long life on the other side of the general election, I should like them to make a statement on how they regard that report. The earlier consultation papers have certainly indicated that it is likely to be a very useful, solid and valuable report, and if in the next few months the Government can say so, that will be most useful for the future.