Impact Of Contract (Rights Of Third Parties) Act On Insurers

This article examines the position in Singapore taken by the insurance industry since the Contract (Rights of Third Parties) Act 2001 ("CRTPA") came into force on 1 January 2002.

The insurance industry in Singapore, both life and non life, have chosen the path of caution and taken the position that CRTPA does apply to insurance contracts, presumably because these contracts have not been expressly excluded from its application under section 7.

Consequently several insurers have maintained the status quo regarding privity of contract between insurer and insured by expressly excluding the application of the CRTPA from all insurance contracts entered into on or after 1 July 2002. This is the start of the period when parties to a contract, must "opt out" of the CRTPA. The first six months when the CRTPA came into force, contracting parties could "opt in" to the CRTPA.

The commonly used clause or slight variations is usually "The application of the Contracts (Rights of Third Parties) Act 2001 (No. 39 of 2001) and any subsequent revision or replacement thereof is expressly excluded insofar as this contract of insurance is concerned". Does this express exclusion of the CRTPA extinguish all avenues available to third parties, who may wish to pursue from an insurer, some perceived benefit under an insurance contract? It appears not.

Third parties may still obtain limited assistance from the UK Third Parties (Rights Against Insurers) Act 1930, (the "1930 Act") which is brought into Singapore by virtue of The Application of English Law Act 1993. The statutory rights of third parties against insurers under the Motor Vehicles (Third Party Risks and Compensation) Act Cap 189 and the Workmen's Compensation Act Cap 354, still remain irrespective of whether the application of the CRTPA is excluded or not.

Under the 1930 Act if an insured who has an insurance contract against liability to a third party which he may incur, becomes bankrupt or makes a composition of arrangement with his creditors; or if the insured is a company, becomes wound up or falls under receivership; or if its property has been possessed by debenture holders of a debenture secured by a floating charge of such property; then if either before or after that event, any such liability to a third party is incurred by the insured, the insured's rights against the insurer under such insurance contract, shall be transferred to and vest in the third party to whom the liability was so incurred.

...