Can a third party bring action against the insurer of another person?

A useful provision of the Insurance Contracts Act 1984 (Cth) is section 51.

Section 51 provides that a third party who is not a party to an insurance contract but has a claim against the insured person under the insurance contract can instead, direct that claim against the insurer if the insured person under the policy is dead or cannot be found.

The equivalent of section 51 is regulated under section 601AG of the Corporations Act 2001 (Cth) (for deregistered corporations). If the insured person is a corporation, section 51 can be used in conjunction with 601AG of the Corporations Act to bring an action against an insurer.

Section 51 is subject to the following requirements:

1. The establishment of liability on the part of the insured person: section 51 (1)(a);

2. The insurance policy providing cover in respect to the liability: section 51 (1) (b); and

3. The insured person has died or cannot be found after reasonable attempts: section 51 (1) (c).

Once the requirements under section 51 are fulfilled, the liability of the insurer is then subject to section 54. Pursuant to section 54, if the insurer proves that their interests were prejudiced by some acts or omissions of the insured person, then the liability of the insurer is reduced to the extent of their prejudice.

In legal proceedings against an insured person (if the insured is represented by an insurer), where the insured person cannot be served with legal documents, an application for a substituted service can be made to serve the legal documents on the insurer by reason of the insurers rights of subrogation, their representation of the insured and pursuant to section 51 (rather than suing the insurer).

Note: This is a general guide only. Circumstances may vary and advice should be sought about your specific circumstances.