Scope of compulsory motor insurance: a loaded gun
The insurance obligation in respect of motor vehicles appears to be under threat. We consider the implications of the European Court of Justice (ECJ) ruling in Vnuk v Zavarovalnica Triglav .
The UK Government has stated its intention to amend the Road Traffic Act 1988 (RTA 1988) as soon as parliamentary time allows, in order to bring a wider range of vehicles into the scope of compulsory motor insurance. Whilst the precise timing for pulling the trigger may be uncertain, which in itself is unsatisfactory, insurers need to be alive to the potential consequences now.
The government has already hinted at the difficulty in interpreting and applying the ruling to the UK. Despite offering reassurance around working with the European Commission (EC) and other Member States to agree what the decision will mean in practice, the apparent reluctance to commit to a timeframe for implementation is not surprising. Minimising cost and inconvenience is likely to be at the forefront of both the EC and the government as they (together with governments from other Member States) consider the issue. There will also be a balancing act to achieve towards the protection of accident victims, which is likely to take time.
The issue at stake
The RTA 1988 and the various Motor Insurers’ Bureau (MIB) agreements are the UK’s means of implementing relevant European Union (EU) legislation that sets out Member States’ obligations towards compulsory motor insurance.
Section 143 RTA 1988 provides that a person must not use a motor vehicle on a road or other public place unless a policy of insurance is in force in relation to the use of the vehicle. It is this provision that governs the extent to which an insurer (or the MIB) will be liable to compensate a victim of an accident involving an uninsured or untraced driver via s.151 RTA 1988 (or MIB agreement).
Vnuk offers two explanations as to what the ‘use of a vehicle’ might mean pursuant to Article 3(1) of Directive 72/166/EEC (the First Directive):
- The first definition appears to suggest that once the definition of vehicle bites, the scope of insurance obligation is limitless.
- However, the ECJ went on to state that the use of a vehicle – for the purpose of the First Directive – is to be defined by reference to the ‘normal function’ of the vehicle in question.
The definition of the function of the vehicle will be a question for domestic courts. However, the unqualified restriction of use to ‘on a road or other public place’ in RTA 1988 is plainly incompatible with the First Directive and will need to be amended.
Widening scope of cover
Vnuk, therefore, carries the potential to extend compulsory motor insurance in the UK to cover vehicles that are to be used other than on a road. Clear examples include lawnmowers, golf buggies and mobility scooters.
The decision is immediately binding on the national courts of all Member States, including the UK. However, it is hard to see how this will be possible when a purposive construction of RTA 1988 would surely stretch the language of the Act too far. With this in mind, it is not envisaged the decision can have an immediate impact on cases currently proceeding in UK courts. A thorough review of domestic legislation – and the implications for ensuring compatibility – are required first.
The UK Government has two years to comply with the First Directive and amend UK law. Therefore, it is more likely that UK courts will continue to adopt the current approach for the time being. Pending that review, the only recourse for a potential claimant is to bring a Francovich claim against the government for failing to implement EU legislation effectively into domestic legislation.
As things stand, the only likely litigation in the UK to arise from Vnuk would be, perhaps, a challenge to the current legitimacy of UK law and against the Department for Transport.
Lower courts are, at present, likely to apply the standard statutory test for what should be covered by a motor policy and what should not.
The current UK Government already has a number of larger issues to address in terms of adjusting the interface between EU law and its implementation in UK law. Although the revised Uninsured Drivers’ Agreement is well in hand, the implementation, to whatever interpretive degree, of Vnuk will need to be factored into arguably more far-reaching issues.
This particular and potential change to UK law is also something of a political football in the run-up to a UK in-out referendum on Europe. It is all too easy to see it listed as a folly of some sort in the tabloid press.
As the current government struggle to wrestle reforms to EU law in general in the year preceding the referendum, it will perhaps seek to water down the impact of Vnuk by introducing more suggested exceptions at the EU-level – such that EU law is more reflective of UK law as it stands and motor insurance still only stands to cover what a layman might still consider to be a 'road accident’.
On the face of it, if Vnuk was fully implemented into UK law, bluntly and with no consideration for policy coverage in contract and the impact on the insurance industry as a whole, it could give rise to considerable frictional and administrative costs to insurers in seeking to amend policy wording to match the radically new statutory cover. There would probably be years of overlap between employers’ or public liability policy cover in contract on the one hand and motor policy cover on the other, with old and new policies overlapping, contradicting and conflicting etc.
It is hoped that the UK Government would be alive to this risk.