Section 10 Insurer's right of set offI1

This section applies if—

rights of an insured under a contract of insurance have been transferred to a third party under section 1,

the insured is under a liability to the insurer under the contract (“the insured's liability”), and

if there had been no transfer, the insurer would have been entitled to set off the amount of the insured's liability against the amount of the insurer's own liability to the insured.

The insurer is entitled to set off the amount of the insured's liability against the amount of the insurer's own liability to the third party in relation to the transferred rights.