Section 10: Duty of insurers to satisfy judgments against person insured in respect of third party risks

(1) If after a certificate of insurance has been delivered under the provisions of subsection (4) of section 6 of this Act to 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 issued under the provisions of paragraph (b) of subsection (1) of section 6 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, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of such judgment any sum payable thereunder in respect of the liability including any sum payable in respect of costs and any sum payable by virtue of any written law in respect of interest on that sum or judgment.
(2) No sum shall be payable by an insurer under the provisions of subsection (1)-
(a) in respect of any judgment unless before or within seven days after the commencement of the proceedings in which the judgment was given the insurer had notice of the bringing of the proceedings; or
(b) in respect of any judgment so long as execution thereon is stayed pending an appeal; or
(c) in connection with any liability if before the happening of the event, which was the cause of the death or bodily injury 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 such event the certificate of insurance was surrendered to the insurer or the person to whom the certificate of insurance was delivered made a statutory declaration stating that the certificate of insurance had been lost or destroyed and so could not be surrendered; or
(ii) after the happening of such event but before the expiration of fourteen days from the taking effect of the cancellation of the policy the certificate of insurance was surrendered to the insurer or the person to whom the certificate of insurance was delivered a statutory declaration that the certificate of insurance had been lost or destroyed and so could not be surrendered; or
(iii) either before or after the happening of the event or within a period of fourteen days from the taking effect of the cancellation of the policy the insurer had commenced proceedings under this Act in respect of the failure to surrender the certificate of insurance.
(3) No sum shall be payable by an insurer under the provisions of this section 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 a material particular or if he has avoided the policy on the ground that he was entitled to do so apart from any provision contained in it:
Provided that an insurer who has obtained such a declaration in an action shall not thereby be entitled to the benefit of the provisions of this subsection in respect of any judgment obtained in any 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 plaintiff in the action under the policy specifying the non-disclosure or false representation on which he proposes to rely and that he intends to seek a declaration and any person to whom notice of such action is given may, if he desires, be made a party thereto.
(4) If the amount which an insurer under the provisions of this section becomes liable to pay in respect of the liability of a person insured by the policy exceeds the amount for which he would, apart from the provisions of this section, be liable to pay under the policy in respect of that liability he shall be entitled to recover the excess from that person.
(5) In this section, unless the context otherwise requires-
"liability covered by the terms of the policy" means a liability which is covered by the policy or which would be so covered were it not that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy; and
"material" means of such a nature as to influence the judgment of a prudent insurer in determining whether he will accept the risk and if so, at what premium and on what conditions.