Duty of insurer to satisfy judgments against persons insured in respect of third party risks

(1) If, after a certificate of insurance has been issued under section 4(3) of this Act, in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under section 4(1)(b) or (c) of this Act (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled the policy, (Third Party Risks) 27 the insurer shall, subject to this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments, Provided that the court shall not proceed to entertain or hear a claim or to issue any judgments to which this section applies until a notice in the form prescribed in the Second Schedule is filed at the Registry of the Supreme Court by the plaintiff and is served on the insurer, and the Registrar of the Supreme Court has issued his certificate that the proceedings are in order. (2) No sum shall be payable by an insurer under the foregoing provisions of this section, (a) in respect of any judgment, so long as execution thereon is stayed pending an appeal; or (b) in connection with any liability, if before the happening of the event which was the cause of the death, bodily injury or damage to property giving rise to the liability, the policy was cancelled by mutual consent or by virtue of any provision contained therein and, either, (i) before the happening of the said event the certificate was surrendered to the insurer, or the person to whom the was issued made a statutory declaration stating that the certificate had been lost or destroyed; 28 (Third Party Risks) (ii) after the happening of the said event, but before the expiration of a period of fourteen days from the taking effect of the cancellation of the policy, the certificate was surrendered to the insurer, or the person to whom the certificate was issued made such a statutory declaration as aforesaid; or (iii) either before or after the happening of the said event, but within the said period of fourteen days, the insurer has commenced proceedings under this Act in respect of the failure to surrender the certificate. (3) No sum shall be payable by an insurer under the foregoing provisions of this section against a judgment in respect of any liability required to be covered by section 4(1)(b) of this Act, if, in an action commenced before, or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration that, apart from any provision contained in the policy, he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact, or by a representation of fact which was false in some material particular, or, if he has avoided the policy on that ground, that he was entitled to do so apart from any provision contained in it, Provided that an insurer who has obtained a declaration as aforesaid in an action shall not thereby become entitled to the benefit of this subsection as respects any judgment obtained in proceedings commenced before the commencement of that action, unless before or within seven days after the commencement of that action he has given notice thereof to the person who is the plaintiff in the said proceedings specifying (Third Party Risks) 29 the non-disclosure or false representation on which he proposes to rely, and any person to whom notice of such an action is so given shall be entitled, if he thinks fit, to be made a party thereto. (4) If the amount which an insurer becomes liable under this section to pay in respect of a liability of a person insured by a policy exceeds the amount for which he would, apart from the provisions of this section, be liable under the policy in respect of that liability, he shall be entitled to recover the excess from that person. (5) In this section, the expression “material” means of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk, and, if so, at what premium and on what conditions; and the expression “liability covered by the terms of the policy” means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel, or has avoided or cancelled, the policy. (6) In this Act reference to a certificate of insurance in any provision relating to the surrender, or the loss or destruction, of a certificate of insurance shall in relation to policies under which more than one certificate is issued, be construed as references to all the certificates, and shall, where any copy has been issued of any certificate, be construed as including a reference to that copy.