§ Order for Second Reading read.
§ The ATTORNEY-GENERAL (Sir William Jowitt)
I beg to move, "That the Bill be now read a Second time."
This is a Bill which, I think, will commend itself to all quarters of the House. It is not in any sense a controversial Measure. It is a Bill which the late Government would have introduced had they been able to find Parliamentary time. It covers a very narrow, limited area, but within that area it will perform a very useful function. It in no way prejudges the question of compulsory insurance; it has nothing whatever to do with that question. Nor has it anything to do with the rights of an insured person to make such agreements as he may choose with his insurance company; nor has it anything to do with the effect of death on the contract, because hon. Members will know that as a rule personal actions come to an end by the death of either of the parties concerned. It is simply designed to deal with this one case. If you have a person to-day who is insured against third party risks and that person incurs some liability to a third person, what is his position in the event of his own bankruptcy?
This question has come before the courts several times, and I cannot do better to convince the House of the necessity for this Bill than give hon. Members the concrete facts of the case which came before the Courts quite recently. A company which owned motor cars was insured against third party risks. One of the drivers of that company had the misfortune to knock down a pedestrian. An action was raised, the pedestrian saying it was the fault of the motor car driver, and the motor car driver saying it was the fault of the pedestrian. In due course, that action was heard, and the pedestrian was awarded somewhere about £500. That action of course taken in the name of the insured person was, as is commonly the case, undertaken in fact by the insurance company. There is no right of action between the pedestrian knocked down and the insurance company. Judgment was entered for £500, but before execution could be levied or the money paid the owner of the motor car who had 129 been found to blame went into compulsory liquidation. What happened? The insurance company, in order to discharge their liability which they were perfectly willing to do, had to pay the money not to the injured pedestrian but to the liquidator of the company, and the company liquidator found himself in this position, that he had as it were by a fortunate windfall an extra sum of £500 to distribute among the general creditors of the company, while the unfortunate person who had been injured and who had been looking forward to this £600 coming to him had to be content with a dividend together with the other creditors.
All the Judges who heard that case lamented that it was the law and pointed out that it was eminently a subject which should be put right by legislation. Indeed, the case would be found even stronger if you imagine this. In the case I have just explained to the House the bankruptcy or compulsory liquidation of the company commenced after the judgment had been secured, and, consequently, in that case the injured pedestrian was able to get a dividend, but, if the bankruptcy of the individual or the liquidation of the company had commenced before the judgment had been obtained, the unfortunate pedestrian who was injured would had had no right even to get a dividend and the money which he was awarded would have had to be utilised, in priority to his claim altogether, in order to satisfy the creditors in the first bankruptcy. One of the Judges in the case suggested that if this sort of thing went on the best thing that could happen to the creditors of a man of doubtful solvency was that he should run into the most expensive thing he could see in order that when he went into bankruptcy it would be quite certain that the insurance company behind him would have to pay a large sum of money.
I think the Bill speaks for itself. Clause 1 makes it plain that it applies only in the event of the insured becoming a bankrupt or making a composition or arrangement with his creditors, or in the case of a company in the event of their being wound up or possession being taken on behalf of the holders of debenture stock. Where these events take place and the insured person has a right of action against the insurance company, it is proposed by this Bill to confer a direct right in favour 130 of the third party so that the third party may deal directly with the insurance company and that the money which comes into being by reason of the fact that the third party has been injured shall be money allocated to that third party and not taken away from him and utilised for the benefit of other persons.
There is an exception in regard to the Workmen's Compensation Act, 1925. The only reason for that exception is that in the Workmen's Compensation Act of 1925 there is already an exactly similar provision which as a matter of practice has worked very well. The terms of this Bill are borrowed from that Act. Under that Act, if an employer goes bankrupt or the employer being a company goes into liquidation, a workman who has been injured and entitled to compensation under the Act can get that compensation direct from the insurance company who insure the employer, so that the workman is not prejudiced by the bankruptcy of the employer and the creditors of the employer do not benefit by any compensation awarded to the workmen. I am sure the Bill will commend itself to the whole House. I do not pretend that the wording is not capable of improvement. I think probably it can be improved, and we shall certainly invite suggestions and collaboration in Committee. In so far as the general principle of the Bill is concerned, hon. Members will agree that it meets a long felt want and does something to remedy a very real grievance.
§ Sir KINGSLEY WOOD
The Attorney-General has put before the House in very clear concise and persuasive terms the object of this Bill, and I do not think there will be anyone who will desire to object to the Second Reading. The scandal—it is nothing less—of the position at the present time is obvious. The present position illustrates the phrase one often hears, not altogeher without merit but not always true, that "the law is a hass." This proposal has received the condemnation of all the Judges who heard the particular case in question. This matter, I believe, first came before the court of first instance, and then went to the Court of Appeal, and, finally, was heard by the highest tribunal in the land, and the judges in very clear and decisive terms said they were bound to come to the decision to which 131 the Attorney-General has referred. But, they said, there was not the slightest doubt that it was against the real intentions of everyone who desired to preserve the rights of the person who was injured and who obtained damages. They said, in no uncertain terms, that Parliament ought to put this matter right. As the Attorney-General has indicated, this Bill was prepared by the last Government and would be prepared by any Government which desired to put right an obvious wrong of this kind. Therefore, on behalf of all those who sit on this side of the House, I wish to say that we associate ourselves with the principle of the Bill. I agree that it requires a little examination in Committee, as far as its terms are concerned, but, apart from that, I think everyone will be glad to see it on the Statute Book at the earliest possible moment.
§ 10.0 p.m.
§ Mr. R. A. TAYLOR
I should like to ask the Attorney-General upon what grounds the Government justify a change in the law in this respect, while they leave untouched the much more serious hardship suffered by people who meet with accidents from motor cars by reason of the absence of compulsory insurance. Under the law as it now stands, the driver of a motor vehicle may run down a person, and seriously maim or injure that person for life and when the matter comes before the courts, it may be held that the accident was solely due to the driver of the vehicle, but, if it is discovered that the driver is uninsured and has no means, the injured party is left in a very unfortunate position. It seems to me that consideration of that question ought to have taken precedence of any attempt to alter the law in the very limited and narrow sense which this Bill proposes. As I understand the Bill, it is restricted to cases arising out of bankruptcies and while it will, to some extent, confer a benefit on some injured persons, it will do nothing, or next to nothing, to protect the poor person who is the victim of a motor accident in the circumstances which I have indicated. Let me put to the Attorney-General a concrete case which happened in my own constituency and which I urge him to consider with a view to strengthening this little Bill in one or two respects. It is the case of a man and his daughter who were knocked down and seriously 132 injured by a motor car. The driver of the car left the victims of the accident on the road and went off in the hope that he would not be discovered. In the course of a few days the police traced the driver—the owner—of the car, and after a time a claim was made against him in the courts. The man and his daughter who were the victims of the accident were awarded over £2,000 damages and costs but the person who drove the car—the owner of the car—promptly filed a petition in bankruptcy. Then of course as the Attorney-General has pointed out, the only person who could take any legal action against the insurance company—in this case there was a well-known insurance company and the premium was properly paid—was the Official Receiver and in so far as he could recover anything from the insurance company it would have to become available for distribution among the general creditors and the injured persons would merely rank pari passu with the rest of the creditors in relation to their claim. But the Official Receiver was unable to recover from the insurance company because, on a number of technical grounds, the company repudiated liability. First they declined to accept liability because the man was driving without a licence.
§ Mr. SPEAKER
Probably the Attorney-General will put me right, but it seems to me that the hon. Member is going rather beyond the scope of this Bill. The question with which the hon. Member is dealing is quite another branch of the law. It might be in order for the hon. Member to say that the Bill does not go far enough, but it is not in order to discuss the merits of particular cases such as he is quoting to the House now.
§ Mr. TAYLOR
With great respect, Sir, may I point out that the Attorney-General was allowed to state a case. I was stating another case which has come to my notice and I was going to proceed from that case to an argument for strengthening the provisions of this Bill in order to meet cases of that class. If you, Sir, rule that I am out of order, I will not pursue the argument any further, but it seems to me that I am keeping within the provisions of the Bill in attempting to state a case with the object of showing the necessity for 133 strengthening the Bill in a particular direction.
§ Mr. ERNEST BROWN
May I, with all respect, point out, Sir, that the Second Reading of a Bill is the only opportunity which a Member has of raising any question of a cognate nature with the Bill and asking why it is not included in the Bill? After this stage I do not think that, under the Rules of the House, a Member has any chance of discussing anything which is not in the Bill, and it seems to me that it is going beyond the Rules to say that the hon. Member is not in order in putting this wider case.
§ Mr. SPEAKER
The hon. Member is stretching the point a very long way. It is quite true that on Second Reading it can be argued that a Bill does not go far enough, but if we were to allow on the Second Reading of a Bill the introduction of all sorts of questions not directly relating to the Bill, it seems to me that it would lead to endless discussion.
§ Mr. TAYLOR
With your permission, Mr. Speaker, I will just say that here is a case where a policy was actually in operation, but where, owing to the attitude of the insurance company, it was impossible for the injured person to secure satisfaction; and the particular point of my remarks was to ask the Government and the Attorney-General whether it would not be possible to devise some method of improving this Bill between now and the Committee stage in such a way that whenever cases arose under this Bill—and they must of necessity be a very limited number of cases; in the aggregate they cannot amount to very many—all settlements under the terms of the Bill should be reported to the Inspector-General in Bankruptcy, and that in cases where poor people have not the means to prosecute a battle with the insurance company in the Courts of law, then, so far as the limited number of cases under this Bill are concerned, some power should be given to him to protect the interests of people who find themselves in the circumstances to which I have drawn attention.
§ Mr. ATKINSON
As I introduced, I think two years ago, a Bill which dealt with the subject-matter of this Bill, I should like to say a few words about it. The complaint which I have against this 134 Bill is that it does not go far enough, and that it could very easily be framed so as to cover at least two other cases where I think injustice is far more common than in the case dealt with by the Bill. The method which I adopted in the Bill which I introduced was to declare that the insurance company should hold all moneys payable on trust for the injured person, or for his relatives in the case of a man who had been killed, thus creating a direct legal bond between the insurance companies and the person who had the claim. In that, I was using an expression which would cover this case, because, if it were a trust in favour of the injured person, it would matter not if the insured person became bankrupt. But it also dealt with another case, of which I have had one or two instances in my own experience; and it is not uncommon. At present an insurance policy is concerned merely with protecting the person who is insured; it does not recognise an injured person at all, but merely the person who is insured; and, as the Attorney-General said, there is no legal right whatever in the injured person to call upon the insurance company to pay him, and therefore the insured person alone can say to the insurance company: "You must pay me the money." I think that in practice insurance companies, when they can, will pay direct, but they have no right to do it unless the policy gives them that right, which it usually does not. Therefore, if the insured person says, "I have got to pay out (say) £100 awarded against me, as you know, but I call upon you to pay me the money," the insurance company is bound to do it, and it has happened not infrequently that the insured man, having got the money, instead of handing it over to the injured person spends it on his own pleasure if you like, or in paying other people, and again the injured man has lost his remedy. That is a case which is at least as unjust as, and really more unjust than, the case dealt with by this Bill, and yet is one which could quite easily be dealt with in language which would cover them both.
There is a third case, reverted to by the Attorney-General. As he reminded the House, the law is—I do not know why, but still it is—that if I knock somebody down and kill him and I die before judgment is obtained against me, 135 there is no right of action against my executors, or against my estate, however wealthy I might he. At any rate in a case where the wrongdoer is insured, if there is a provision for a trust being created from the date of the accident for the benefit of the injured person, that trust again can easily be so framed as to make it quite clear that the trust should not be affected by the death of the insured person. We have three cases where everybody must feel that something ought to be done to ensure that the injured person gets paid. The case covered by the Bill, the case where the man who was insured gets the money and spends it on himself instead of handing it over, and the case where the man who has done the wrong dies before compensation is awarded—all those three cases could be dealt with by the form which I adopted, simply providing that the insurance company should hold any money payable on trust for the injured, person.
There is one other matter, which I merely mention as a matter which I think the Government might consider when they are dealing with the rights of an injured person in this way, and it is this: how far insurance companies shall be allowed to escape liability by unfair conditions. As we know, they escape by having a provision that if immediate notice is not given of an accident they cease to be liable. We know that in every policy there is a provision, for instance, that the truth of the statements made in the application for the policy shall be the basis of the policy, and if anything untrue has been stated the policy is avoided. There was a case the other day of a man who had run into the back of another car and killed one man and half killed another, and there were very big claims against him He was insured. It turned out that in the application form some years before he had been asked, "Have you any defect of eyesight?" and he had said "No." He was shortsighted, but with the glasses which he wore he could see perfectly. It came out at the inquest that he was shortsighted, and the insurance company repudiated liability, and the unfortunate people who had been injured never got paid, because in that case the insured man also died while the matter was still in dispute and before judgment was ob- 136 tained against him; and even if judgment had been obtained the, injured people would have got nothing because of the conditions of the policy.
The whole thing really wants reconsidering The country is demanding more and more that the rights of injured people shall be protected. That is the whole point of the suggestion of compulsory insurance, and compulsory insurance is not going to be the good which it ought to be unless all these matters are considered, and unless the whole question of how far insurance companies—because they do not intend to be philanthropists—can escape liability by conditions which are unfair from the point of view of the injured party, is also considered. The conditions may not be unfair from the point of view of the insured person, but from the point of view of the injured party, there are many conditions which are hopelessly unfair; and if Parliament is going to make this insurance compulsory, I venture to suggest that that is a matter to which at the same time this House should give its very serious consideration.
As to this particular Bill, I do beg of the Attorney-General to consider the form of language which I have suggested. I think he will see that it could easily be made to cover all these three cases, one of which is just as unjust as the others. There seems really no rhyme or reason in picking out one and going to the trouble of passing an Act of Parliament about it when you could just as easily make your Act cover all the three.
§ Mr. HARDIE
I should not have spoken but for the speech of the hon. and learned Member for Altrincham (Mr. Atkinson), who has just sat down, and who made it clear to me that no matter how definite one might be in trying to guard against what might happen, cases do happen, as in the case of the driver with defective eyesight, where the injured party suffers. There is no way out of this so long as we have the present system of insurance. The only way out that I see is for the State to become the licensing authority, and that no one shall be in charge of a car unless he has a licence from the State, and when he gets his licence handed out, with his number on it, at the same time he should pay his insurance to the State, and then—
§ Mr. SPEAKER
The hon. Member is now raising a question which is entirely outside the scope of the Bill.
§ Mr. HARDIE
Take the case of a company insuring that if a car driven by a man who held a licence did a certain damage, they were liable for a certain sum of money—
§ Mr. SPEAKER
I do not think the hon. Member will find anything about that in the Bill. That is quite another Bill that the hon. Member wants to discuss.
§ Mr. HARDIE
I am trying to get a way out for the hon. and learned Member who has been giving these experiences, and other speeches have shown that there is no way out. They all agree that even if this Bill passes, there is still a doubt. You may have a power given through this Bill, but you do not destroy the insurance company's power to say there is something wrong with the driver, and you still leave the injured party without compensation. What I suggest is that this Bill is not what it should be at all, and that if you want to deal with the party who has been hurt and to ensure that he gets something that he has insured for before he has been hurt, you must put it in the hands of the State, so that the State will see that he gets justice.
§ Mr. WARDLAW-MILNE
With regard to the possibility of the Government considering the wider application of this Bill, I wish it were within the rules of Order to refer to the possibilities which may arise after the Bill which I understand the Minister of Transport has under consideration comes into force, because, as this House has quite recently accepted on two occasions at least, unanimously, the desire for a Third Party Insurance Bill, I do not think there can be any doubt whatever as to the feeling of the House on the subject. But while I know it is not possible for me to support the views of the hon. Member who spoke from below the Gangway opposite, I think it will be generally agreed, and agreed by the Government themselves, if they consider the matter, that in reality this Bill, good as it is—I do not want to oppose it in any way—is putting the cart before the horse; and until we get the question of third party insurance finally settled in the Minister of Transport's Bill, it is difficult to deal with one particular small item in 138 the whole gamut of third party insurance questions. I think that when the Attorney-General, who described the Bill, if I may say so, most excellently, so far as it goes, will consider in Committee the wording of this Bill, he will find that there are some Clauses in it which will require very drastic reconsideration. For example, in Clause 1 (b):in the case of the insured being a company, in the event of the company commencing to be wound up,I do not know if he can describe what that phrase means. Legal people may be able to do so, but I think practical people would find it very difficult to define. I am, however, content to rest on his assurance that when the Bill is in Committee he will be prepared to reconsider the wording of these Clauses, but I suggest seriously to the Government that even before that it would be possible so to amend the Bill as to deal with some of the problems—not all, as that cannot be done without having the Minister of Transport's Bill—which naturally arise under a third party insurance and which go very much further than this very small Measure itself can do.
§ Mr. H. W. WALLACE
The learned Attorney-General stated that the House might possibly suggest to him how this Bill might be improved. I wish to associate myself with those who have appealed to the Government to make this Bill go further than is at present the case. The subject dealt with in the Bill is sufficiently important to justify the Government taking immediate action. I want to give one case showing how an insurance company escaped its liability by the terms of its policy. I have in mind a serious accident from which it was clear that the third party should secure benefit, and the company escaped liability by being able to show that the insured person was the negligent person, and had not previously declared that he had been party to an accident before he took out the policy. If insurance companies can escape their liability like that, it is time they were made to meet their liabilities.
§ Lord EUSTACE PERCY
There is one thing which has emerged from the Debate about which I should like the Attorney-General's opinion. The object of this Bill is that, broadly speaking, in the case of an insured person who fades 139 away, as it were, the injured person shall have a right in consequence of the accident, under the insurance policy. But surely the fading away which results from bankruptcy is the same as the fading away which results from the death of the insured person, and the same right should be given to the injured party as against the man who dies as against the man who goes bankrupt. I can see no logical argument against that or any reasonable argument in favour of confining the Bill to cases of bankruptcy and excluding cases of death. The argument which the right hon. Gentleman used applies equally to cases of death as to cases of bankruptcy. In the case of bankruptcy, is it not absurd that the fact of the accident which has injured somebody else should enrich the bankrupt person's estate for division among the creditors? It is absurd equally that the fact of the accident should enrich the estate to the benefit of the insured person's successors in the case of death, and that the injured person should have no right at all.
§ The ATTORNEY-GENERAL
The right hon. Gentleman will find, for some reason I do not understand, that it has been a rule of very long standing, probably borrowed from a misunderstanding of the civil law, that if death is brought about, the cause of action itself goes. Consequently, if an insured person dies at the present time, the insurance company are automatically relieved of liability, since he is relieved from liability by his death, and their obligation is to indemnify him.
§ The ATTORNEY-GENERAL
Certainly. The right hon. Gentleman will see therefore that logically the position is entirely distinct. In answer to the other criticisms that have been made, the whole question of compulsory insurance is a very difficult question, and the more it is considered the more difficult it seems to be. The matter is under consideration at the present time, and many of the observations that have been made will be most helpful in that consideration, because obviously there is a great deal that ought to be done.
§ Mr. ATKINSON
Is there any reason why the insurance company should be allowed to benefit by the death of their assured? It would be no injustice to the insurance company to create a trust, because there is no reason why they should benefit by the death of the assured by being relieved of liability to the injured third party.
§ The ATTORNEY-GENERAL
The insurance company will answer, I have no doubt, that that was one of the factors they took into consideration in, fixing the premiums. [Interruption] I have no doubt that is what they would answer, but, if I am asked my opinion, I rather agree with the hon. and learned Member.
§ Mr. HARDIE
Is there any reason why the sum from the insurance company should be included as part of the estate of any man who goes bankrupt? Why should not that be kept separate? That is where a State insurance scheme would come in.
§ Mr. McKINLAY
I welcome the statement of the Government that they intend dealing with third-party risks, but there is not much comfort for the third party if the insurance company is a bogus one. That is quite possible. We had a bogus company in Glasgow and, so far as I am aware, it is operating at the present time. There was a case where an injured party's dependents were awarded £1,800 and got the option of taking the only assets the insurance people had, a deposit receipt for £350, or nothing, and from that £350 the sum of £50 had to be paid to the Trustee in bankruptcy for the assigning of the right to those assets. There are mutual insurance societies who must find it a sheer financial impossibility to carry out their undertakings on a premium which is 40 per cent, less than that charged by a first-class insurance company. In Glasgow at the moment omnibuses are running under these bogus insurances. People are liable to be killed and are being killed, and their dependents are left with nothing. I suggest that in tightening up the Measure action should be taken to deal with this form of mutual insurance among omnibus proprietors, because it constitutes bogus insurance. [Interruption] Well, here was a case where a widow was awarded 141 £1,800. The man who nominally owned the omnibuses went into bankruptcy. His chief creditor was a bookmaker who advanced him the money to start the omnibuses. [Laughter] It may be very funny, but it is also very tragic and it is true. The widow was left with dependent children and the sum total she received was £220.
§ Dr. BURGIN
I desire to welcome this Bill as a step in the right direction, but I would like to call the attention of the Attorney-General to some points which have occurred to me in reading it. A necessary defect of a short Bill is that there is a temptation to leave out a great deal of material, and I find that in Clause 1 (b) the wordsIf either before or after that eventmay cause in practice some difficulty. The case I have in mind is where an award is not paid in one sum. It is not hard to conceive a case in which the event of bankruptcy or the liquidation of a company happens after a part payment of some award, and I would like the Attorney-General to consider whether the words transferring the rights against the insurer will be adequate to cover a case in which there has been a part payment prior to either bankruptcy or winding-up. Then there is another matter. We are talking here of a transfer of the rights which the insured person has against the insurer, and we are thinking in terms of the victim of the accident. The Attorney-General will know of many cases in which the insurer is able to escape liability by reason of some technical defect in the contract between the insured person and the insurer with which the victim is in no way concerned. Take, for example, an entirely innocent slip in the filling up of the proposal form. That goes beyond the conception of this particular Bill, but it is a point which ought to be dealt with. I know of the case of an award having been given for several thousand pounds against a person that person being completely left without a farthing in the world because he had assigned his insurance rights to the victim, and then after judgment the insurance company has availed itself of a technicality in the proposal form. In this way the whole purpose of the transfer to the victim of what was thought to be a valid claim has been defeated. It may be beyond the wit of this House to 142 draw up a form of words which will cover without injustice such a point as that, but I take it that in Committee the possibility of an innocent slip may be guarded against as between the victim and the insurance company.
Clause 1, Subsection (1b) deals with the transfer of those rights. I presume that the Attorney-General will contend that in order that rights may be enforceable against parties where there is no contractual relation it may be necessary to have some rules of procedure to throw an obligation on the insured person to place certain information at the disposal of the victim. I can conceive an insurance company demanding the production of the policy, and I can see a great deal of information in. the hands of the insured person which is not available to the victim under any principle of discovery of document. I can also see the necessity of providing rules to ensure that the rights to transfer will have a practical means. I hope the Attorney-General will not object to these small points being raised on the Motion for the Second Reading.
I observe that at the end of Clause 1, Sub-section (1b) it is expressly provided that the insurance company shall not be under any greater liability than it would have been to the insured person. That simply means that the Bill is proposing to be generous at the expense of somebody else, but I ask the Attorney-General whether he thinks it is wise to insert in this Bill a provision that no enlarged period of the Statute of Limitations will be inserted. At present we are transferring rights and we are laying down that nothing more shall be transferred than that which the insured person possesses. Would it not be well to say that the time limit should not be extended? I am rather inclined to agree with those who have stated that this Bill does not go far enough, but as one who has had some practical experience of the injustice of the present law I intend to give this Measure my whole-hearted support, because I think it is a step in the right direction.
§ Mr. CLARKE
There is one rather important point which was referred to by an hon. Member opposite, and to which I should like to direct the attention of the Attorney-General. That is the rather flagrantly unjust provision of the law 143 which relieves insurance companies of responsibility when, after an. accident, it is discovered that the accident was due to some inherent flaw in the mechanism of the car. I should like to mention a recent case which I have in mind, in which a large wagon—a steam wagon, I believe—crushed a friend of mine against a stone wall, breaking several of her ribs and so horribly mutilating her leg that flesh or skin had to be grafted from one leg on to the other. Because it was subsequently discovered that the accident was caused by the steel of the steering rod of the wagon having crystallised, all liability was disclaimed by the insurance company. I think that this would be an opportunity of getting that kind of thing rectified, and I wanted to draw the attention of the Attorney-General to it, and to ask him to see if he can do something in the matter.
§ Question put, and agreed to.
§ Bill read a Second time, and committed to a Standing Committee.