High Court Rules That Certain Provisions Of Domestic Motor Insurance Law Contravene Insurance Directive 2009/103

In RoadPeace v Secretary of State for Transport & Motor Insurers’ Bureau (Interested Party) [2017] EWHC 2725 (Admin), the claimant – a road safety charity – claimed that certain provisions of UK law relating to compulsory vehicle insurance and compensation for victims of uninsured/untraced divers contravened European Directive 2009/103 (“the Directive”). 

The Directive required Member States to ensure that any liabilities arising from the “use of vehicles” were insured, and that there was a system in place for victims of uninsured and/or untraced drivers to be compensated. The domestic statutory provisions addressing these requirements are in the Road Traffic Act 1988 (“the Act”), specifically:

  • Under s143, it is illegal for an individual to “use a vehicle” in a public place without a valid insurance policy in place;
  • s145, sets out the provisions that an insurance policy must contain in order to be a valid policy for the purposes of the Act’s obligations; and
  • s151, empowers claimants who have obtained judgment against an insured party to claim from the relevant insurer directly, regardless of whether the insurer itself would be entitled to avoid the policy.

The Act was considered to be compatible with the Directive prior to this legal challenge.

In this case, the claimant asked the court to consider four matters:

  1. Were s143, s145 & s151 of the Act compatible with the Directive given that they allowed limitations to be applied to the insurance policy in question i.e. the Act did not require absolute coverage.
  2. Whether insurers were permitted to raise against the claimant any breaches of the policy by the insured (under the European Communities (Rights against Insurers) Regulations 2002). And, if they were so entitled, whether this was incompatible with the Directive.
  3. Whether UK law was compatible with the Directive in the light of Vnuk v Zavarovalnica Triglav dd (C-162/13) given that domestic law only required insurance for vehicles “intended or adapted for use on roads”.
  4. Whether the meaning of the term “accident” in Regulation 2(1) of the EU (Rights Against Insurers) Regulations 2002 was incompatible with the Directive as it restricted the meaning of the word to accidents on “a road or other public place.”

On each of the matters above, it was held by Mr Justice Ouseley that:

  1. There was no incompatibility in UK law allowing for limitations to be placed on a policy and the requirements of the Directive. Specifically, the limitations regarding “road rage” and “deliberate damage” were upheld. He noted that:

 “It would be remarkable if, without spelling it out in so many words, the CJEU had decided as far back as Bernaldez, the language of which, in its usual way, it repeats in subsequent cases, that any use which could be made of a motor vehicle required compulsory insurance… It would be a more expensive process to obtain insurance, yet quite unnecessary for the achievement of the Directive’s purposes, with attendant needless criminalisation; indeed it could create a perverse incentive to avoid insurance at all.”

  1. The provision allowing insurers to raise breaches of the policy by the policyholder against a potential claimant was not incompatible with the Directive (as long as the defences raised were not more extensive than those defences it was entitled to raise against the insured – which was not the effect of the provision). He noted that:

“It would be a strange result if exclusions or grounds for avoiding the contract which could not be raised as against the third party in proceedings against the insured, could nonetheless be raised in direct proceedings against the insurer… rather the two forms of claim are intended to proceed on the same footing.”

  1. It was accepted by the defendant that Vnuk widened the applicability of the compulsory insurance obligation under the Directive which the domestic legislation had not yet reflected. The fact that compulsory insurance was required only for vehicles “intended for use on roads” or other public places was incompatible with the Directive in light of Vnuk.
  2. Similarly, it was accepted by the defendant that the definition of “accident” did not comply with the Directive.

 

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