Bringing Another Seat To The Table: Expansion Of Third Parties' Rights Under CICA 2019

• Published date: 03 September 2021
• Subject Matter: Consumer Protection, Insurance, Consumer Law, Insurance Laws and Products
• Law Firm: William Fry
• Author: Mr Paul Convery, Patrick Murphy and John Larkin

A core principle of Irish contract law is that a person who is not a party to a contract does not have enforceable legal rights, even where the contract is intended to benefit that person. This principle applied equally to most insurance contracts. This core principle is now qualified in respect of certain insurance contracts with the coming into force of sections 21 and 22 of the Consumer Insurance Contracts Act 2019 (CICA) in September 2020.

Right of third party to claim against insurer

Under Section 21 of the CICA where a person (Insured) is insured against a liability that may be, and is incurred by the Insured to a third party consumer, the Insured's rights against the insurer will transfer to the third party consumer where a) the Insured is dead, cannot be found, is insolvent or b) it is just and equitable to do so.

Section 21(3) bestows a right to information on a third party to seek information from the insurer (or any other person) regarding;

• the existence of a contract of insurance;
• the identity of the insurer;
• the terms of the contract; and
• whether the insurer had informed the insured of their intention to refuse liability.

Section 22 supplements section 21 and applies where the requirements under section 21 have been fulfilled. It allows the third party to bring proceedings directly against the insurer for a declaration of actual or potential liability to them. The insurer may rely on any defence which the Insured would have had available to them.

Therefore, insurers may be forced to disclose the existence of an insurance contract with an Insured in certain circumstances and may have to defend proceedings issued against them by a third party unrelated to the original insurance contract.

Origins of the New Sections

Sections 21 and 22 will have wide-ranging implications for insurers. The Report on Consumer Insurance Contracts by the Law Reform Commission (Commission) remarked that the rule on privity made it difficult for third parties to obtain benefits to which they were entitled, especially in instances where the third party was unable to recover directly against the insurer, even though the Insured had a valid insurance policy. For example in the case of employers liability contracts, an injured employee may not be able to recover directly from the employer's insurer where the employer was in liquidation, had died or whose decision making capacity was in question.

The Commission made specific reference to section 62 of the Civil...