21. (1) Where a person (in this section referred to as “the person”) is insured under a contract of insurance against a liability that may be incurred by the person to a third party (and such a liability is incurred) then, where either of the following applies—

(a) the person has died, or cannot be found, or is insolvent, or

(b) for any other reason it appears to a court to be just and equitable to so order,

the rights of the person under the contract against the insurer in respect of the liability shall, notwithstanding anything in any enactment or rule of law, be transferred to and vest in the third party to whom the liability was so incurred.

(2) Accordingly, a third party, in the circumstances described in subsection (1), has a right to recover from the insurer, in accordance with the contract of insurance, the amount of any loss suffered by the third party even though the third party is not a party to the contract of insurance.

(3) Where a third party reasonably believes that the person has incurred a liability to which this section applies, the third party shall be entitled, by way of notice on paper or on another durable medium, to seek and obtain information from the insurer or from any other person who is able to provide it (neither of whom shall unreasonably refuse such information) concerning—

(a) the existence of a contract of insurance that covers the supposed liability or which might be regarded as covering it,

(b) if there exists such a contract, who the insurer is,

(c) the terms of the contract, and

(d) whether the insurer has informed the person that the insurer intends to refuse liability under the contract in respect of the person’s supposed liability.

(4) A third party shall be entitled to issue proceedings directly against the insurer to enforce the terms of the contract of insurance without having first established the liability of the person, but before the terms of the contract can be enforced against the insurer in the proceedings the third party shall be required to establish the person’s liability.

(5) For the purposes of this section, a liability is established only if its existence and amount are established and, for that purpose, “establish” means establish—

(a) by virtue of a declaration under section 22,

(b) by judgment or decree,

(c) by an award in arbitral proceedings, or

(d) by an enforceable agreement.

(6) (a) Where a third party proceeds directly against an insurer, anything done by the third party which, if done by the person, would have amounted to or contributed to fulfilment of a condition of the insurance contract is to be treated as if done by the person.

(b) Without prejudice to paragraph (a), the third party has, in relation to the third party’s claim, the same obligations to the insurer as the third party would have if the third party were the person, and may discharge the person’s obligations in relation to the loss.

(c) The insurer has the same defences to an action brought by the third party as the insurer would have in an action by the person.

(d) Without prejudice to paragraph (c), the insurer shall be entitled to set off any liabilities incurred by the person in favour of the insurer against any liability owed by the insurer to the third party.

(7) The rights of a third party in this section shall not be subject to a term in a contract of insurance that requires the person to provide information or assistance to the insurer if that term cannot be fulfilled because the person is an individual who has died or cannot be found; but “term that requires the insured person to provide information or assistance to the insurer” shall not include a term that requires the person to notify the insurer of the existence of a claim under the contract of insurance.

(8) The rights of a third party in this section shall not be subject to a term in a contract of insurance that requires the prior discharge by the person of the person’s liability to a third party.

(9) Nothing in this section shall be interpreted as requiring that the third party be in existence either at the time the contract of insurance was entered into or at the time of assent to such a contract by another third party.

(10) In this section, “cannot be found” —

(a) means, in the case of an individual, a missing person, that is, a person who is observed to be missing from his or her normal patterns of life, where those who are likely to have heard from the missing person are unaware of his or her whereabouts and where the circumstances of the person being missing raise concerns for the person’s safety and well-being, and

(b) includes, in the case of a company, an insolvent company, and where such a company has been struck off the register of companies the third party shall (subject to the other requirements of this section) not be required to restore it to the register before proceeding directly against the insurer.

(11) In the case of an insolvency, moneys that would otherwise be payable to the person under the contract of insurance shall be applicable only to discharging in full all valid claims by the third party against the person in respect of which those moneys are payable, and no part of those moneys shall be assets of the person or applicable to the payment of the debts (other than those claims) of the person in the insolvency or in the administration of the estate of the person, and no such claim shall be provable in the insolvency or in the administration of the estate of the person.

(12) In this section, “insolvency” means—

(a) in the case of an individual, the individual is adjudicated bankrupt or there is issued, or there comes into effect, in respect of him or her—

(i) a Debt Relief Notice,

(ii) a Debt Settlement Arrangement, or

(iii) a Personal Insolvency Arrangement,

(b) in the case of a corporate body, the winding up of the body commences or—

(i) an examiner is appointed to it under Part 10 of the Companies Act 2014, or

(ii) a receiver is appointed to property of the company,

or

(c) in the case of a partnership, the dissolution of the partnership commences.

(13) Where, in respect of any one act of negligence or any one series of acts of negligence collectively constituting one event, there are two or more claimants and the total of the sums claimed for damages for injury to property or for which judgment has been recovered for damages for such injury exceeds the sum which the insurer or guarantor has insured or guaranteed, the liability, as regards each claimant, of the insurer or guarantor in relation to such damages shall be reduced to the appropriate proportionate part of the sum insured or guaranteed.

(14) In this section, “the person” includes an individual, a partnership, or any corporate body.

(15) In this section, a “third party” means a consumer who is or may be entitled to benefit under the terms of a contract of insurance, whether by way of indemnity or as a person who incurs an injury or loss to which the contract of insurance applies.

(16) It is irrelevant for the purposes of this section whether or not the liability of the insured person is or was incurred voluntarily.