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Vnuk: End of the Road? - Nicholas Bevan, Solicitor, Mediator, Consultant and Trainer

20/10/14. On 4th September the Court of Justice of the European Union (CJEU) delivered what is arguably its most important ruling to date on the scope of compulsory third party motor insurance (TPMI). The decision in Damijan Vnuk v Zavarovalnica Triglav d.d., [2014] CJEU Case C-162/13 is a ‘game-changer’, in the sense that it is likely to precipitate significant legislative reform across the European Union, including the UK. It is also something of a ‘name-changer’, at least for those of us who specialise in ‘RTA work’: because that term has become something of a misnomer. The Vnuk ruling confirms the scope of TPMI regime is wider than is signified by terms like ‘road accident’.

False assumptions

From a claimant practitioner’s perspective, one reassuring feature of motor loss and injury work is the knowledge that there is usually a motor insurer somewhere in the background and, ultimately, that it will satisfy any award or settlement; failing that, the Motor Insurers Bureau (MIB) will usually step in. Consequently, in the vast majority of motor loss and injury claims, our main efforts are usually directed to establishing liability and proving the quantum of our client’s loss and injury. To this extent at least, the legal aspects of TPMI is often perceived to be something of a placid backwater, one that has been left relatively undisturbed by the turbulence inflicted by that tide of European law that Lord Denning so vividly portrayed in Bulmer (HP) Ltd v J Bollinger SA [1974] Ch 401.

It is well established that European law does not concern itself with civil or criminal liability arising out of the use of motor vehicles, here our indigenous law reigns more or less supreme1 as does the contractual autonomy of insurers and their policyholders to define the terms of cover under a TPMI. It is also true that when it comes to TPMI the contractual and statutory liability of motor insurers has been regulated by a succession of Road Traffic Acts over the past 84 years and even that relative latecomer, the MIB, has been with us for 68 years. This statutory and extra-statutory provision has attracted its own coterie of case authorities, much of it well settled and seemingly unaffected by European law principles.

Unfortunately appearances can be very deceptive, particularly in the context of TPMI. In Churchill Insurance Company Limited v Benjamin Wilkinson and Tracy Evans v Equity and Secretary of State for Transport [2012] EWCA Civ 11662 the Court of Appeal was obliged to apply a European law consistent approach to interpreting section 151(8) of the Road Traffic Act 1988 (the I988 Act). The relevant European law is the directives on motor insurance that Part VI of the 1988 Act is supposed to implement. There are six of these directives3 but mercifully the sixth is a consolidating instrument. Even so, it boasts a rather cumbrous title: Council Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009 relating to insurance against civil liability in respect of the use of motor vehicles. We will content ourselves here with referring to the latter directive as ‘the Sixth Directive’. When the Court of Appeal compared s151(8) of the 1988 Act with the legislative objectives set out in these directives, it was found wanting. In short, it found it necessary to find a means of patching and mending the gap in our national law provision for safeguarding the interests of motor accident victims so that it complied with the minimum standards required under European law. It achieved this by adding an extensive passage of ‘notional’ wording to the offending subsection that applies in a rather unusual scenario4. Hitherto, the way the 1988 Act operated was to confer TPMI cover to the claimant under s151(5) of the 1988 Act only to remove it under s151(8)5. The Court of Appeal inserted new ‘notional’ wording that conferred a qualified entitlement to indemnity on policyholders foolhardy enough to allow themselves to be driven in their own car by an uninsured driver. The ruling produces what is in effect a judicially contrived ‘statutory’ annotation to the 1988 Act. All said and done, this was a relatively discrete judicial intervention but it confirms an important point of principle: namely that our national law provision in this area must be interpreted and applied consistently with the European law it is supposed to implement6.

The approach taken by the Court of Appeal in Delaney v Pickett [2011] EWCA Civ 1532 serves as a counterpoint to Churchill: it is an object lesson on the unfortunate consequences of failing to apply a European law consistent interpretation. This claimant was also a passenger but the car in which he was riding was subsequently deemed to be uninsured because its insurer managed to obtain a declaration under s152 of the 1988 Act that the policy was void for non disclosure of material facts. The insurer, acting as an agent of the MIB, later refused to pay out on the ground that clause 6.1(e)(iii) of the Uninsured Drivers Agreement 1999 excludes any liability to compensate a passenger who knows that the vehicle is being used in the furtherance of a crime. It was alleged that the driver and passenger were en route to sell their supply of cannabis. Unfortunately the Court of Appeal blithely applied the plain and natural meaning of this exclusion of liability without troubling to check whether this was permitted under the same European directives on motor insurance. In consequence, it upheld the first instance rejection of the claim. It was this author’s strong view at the time7 that had the Court applied a European law consistent interpretation then it would have realised this particular exclusion of liability was blatantly unlawful. Unfortunately the European law issues were neither appreciated nor raised by those concerned until far too late and so an appeal to the Supreme Court was refused.

Fortunately for Mr Delaney, this was not the end of the road. It took an able team of human rights specialists to set matters to rights in Delaney v Secretary of State for Transport [2014] EWHC 1785 (QB). Philip Moser QC and Eric Metcalf of Monkton Chambers succeeded in obtaining a Francovich award against the minister on the ground that clause 6.1(e)(iii) of 1999 Agreement was unlawful. They achieved this by addressing the European law issues that had been ignored in the Court of Appeal. The minister is unrepentant and has decided to appeal this decision8. Although it would be wrong to offer any views on how the Court of Appeal will approach this case, or to speculate on its likely outcome, it is fair to observe that Mr Justice Jay’s first instance finding is supported by a series of consistent and directly relevant CJEU rulings that preclude member states from introducing any exclusion not expressly sanctioned by European law9. The reader will be aware that the CJEU is the final arbiter on issues such as the interpretation of a directive10 and so may draw his or her own conclusions.

Churchill and Delaney both demonstrate that the European directives on motor insurance can have a decisive influence on whether a claimant is entitled to compensatory protection, regardless of whether this is actually conferred under our national law provision. This sets the scene for what is probably the most significant and far reaching CJEU ruling to date on the compulsory third party insurance requirement. Damijan Vnuk v Zavarovalnica Triglav d.d., [2014] CJEU (Case C-162/13) is a case one that no practitioner in this field can afford to ignore.

Precursors

It is important to emphasise from the start that the Vnuk ruling is no aberration. It is better understood as a logical development emanating from a trend of CJEU rulings that date back to its seminal judgment in Bernaldez (C-129/94) [1996] E.C.R. I-1829. Although Bernaldez was did not consider the geographic or technical scope of the TPMI cover required under European law, its evocation of the legislative objective of the European directives on motor insurance, namely of protecting motor accident victims and the comprehensive nature of that policy aim, lies at the heart of any proper understanding of European and national law provision in this area.

In Bernaldez the CJEU ruled that a Spanish law that absolved a motor insurer from liability to compensate the victims of intoxicated drivers was unlawful because (i) the aim of the directives, is to protect third party victims, and (ii ) any derogation from that protection must be expressly sanctioned by the relevant directives to be valid. It went on to rule: ’...that statutory provisions or contractual clauses in an insurance policy may not be relied on as against passengers and third parties who are the victims of an accident.’11 This ratio and the protective principle that underscores it has been extensively quoted with approval and applied in a number of later CJEU rulings12.

1996 can be viewed as a watershed moment, when the UK Government appears to have made a conscious decision not to fully implement these directives. It is worth noting that UK Government intervened in Bernaldez, and so had firsthand knowledge of the ruling and presumably its implications. Unfortunately, far from undertaking a comprehensive comparative law review of its own national law provision it determined on introducing a raft of new (and clearly unlawful) limitations and exclusions of liability in the Uninsured Drivers Agreement 1999.

It takes no large leap of logic to apply the comprehensive nature of what in this article is dubbed ‘the protective principle’ (used in the context of permitted exclusions of liability) and then to extend its application to the general scope of the TPMI cover required. Permitted restrictions to liability and the scope of that liability are to a large degree two sides of the same coin: between them, they define the extent of cover.

Mr Vnuk: Up a ladder in a farm yard

The case facts in Vnuk appear, at first glance, to be a most unpromising candidate for an ‘RTA’ or motor insurance liability claim. The accident scene has a decidedly rustic setting as well as an occupational injury theme because Mr Vnuk was working as a farmhand, loading bales of hay into the loft of a barn using a ladder that was in turn standing in a farmyard. Unfortunately a reversing tractor propelled its trailer into the ladder, knocking Mr Vnuk off and injuring him in the process. The accident occurred on private land in rural Slovenia in the dog days of the 2007 harvest13.

Initial setbacks

The first and second instance decisions in Slovenia dismissed Mr Vnuk’s claim against the motor insurers of the tractor but his lawyers persevered. It wsa the Slovenian appeal court, who despite having evident misgivings, finally referred the case to the CJEU for a preliminary ruling; just to be certain sure. It asked the CJEU to determine whetherthe concept of ‘the use of vehicles’ within the meaning of Article 3(1) of [the First Directive14] should be interpreted as not extending to these case facts on the basis that the incident did not occur in the context of a road traffic accident.

Differences of emphasis

A number of member states intervened, including the UK, and they argued that the compulsory insurance requirement should not apply. The European Commission and the Advocate General thought it should: in order to uphold the wider interest of ensuring a consistent approach to implementing the directives throughout the European Union.

It is worth noting that there are a number the subtle variations of emphasis within the terminology employed in the different language editions of these directives on motor insurance and that this has lead to discrepancies in the way in which individual member states have implemented the compulsory TPMI requirement. For example, whilst the English version of the First Directive refers to the ‘use of vehicles’, the French version refers to the 'circulation' of vehicles, the latter phrase inviting an inference of use confined to some kind of traffic scenario. The Court expressed the importance of adopting a consistent approach and it noted that ‘where there is divergence between the different language versions of a European Union text, the provision in question must be interpreted by reference to the general scheme and purpose of the rules’15.

A primary objective

The Court then made an important observation on the policy that underlies these directives. It stated, for the first time, that the objective of protecting accident victims is of equal importance to the aim of freeing the movement of persons and vehicles with a view to achieving the internal market. Hitherto, the social aim of providing compensatory protection was widely considered to be incidental or subordinated to the wider objective of encouraging free movement within the EC16.

The newly confirmed importance of this protective principle affects not only how one should interpret the motor insurance directives but also the prospects of securing Francovich damages where an individual has sustained loss caused by a member state’s failure to properly implement a directive17.

Court of Justice ruling

As to Mr Vnuk's claim, the Court ruled that the accident circumstances were capable of falling within the scope of insurance cover required under the directives. It referred Mr Vnuk's case back to the Slovenian courts to make the necessary factual findings.

Vehicles caught by the TPMI requirement

On the specific issue as to whether a reversing trailer propelled by a tractor was required to be covered by the article 3 insurance requirement affecting the ‘use of vehicles’, it ruled that it was.

Motor vehicle use covers ‘any use of a vehicle that is consistent with the normal function of that vehicle’18. Compare that with the much narrower definition to be found in section 185 of the 1988 Act19 and sections 143 and 145 that impose the duty to insure and prescribe the extent of the TPMI cover.

When one considers the definition of ‘vehicle’ provided in what is now article 1.1 of the sixth consolidating directive on motor insurance (2009/103/EC ) in the light of the new interpretation given in Vnuk, it is clear that some vehicles which are currently considered under our national law to be exempted20 from the third party insurance requirement21 are in fact now capable of falling within the duty to insure under a European law consistent reinterpretation of our national law.

It should be noted that article 5.2 of the sixth directive provides member states with an escape mechanism that allows them to devise a list of vehicle types that are to be derogated from the insurance requirement. However these must also be covered by the compensatory guarantee scheme under what is now article 10 that prescribes the MIB’s responsibilities for compensating victims of uninsured and unidentified vehicles. Hitherto, the Department for Transport (DfT) has considered it unnecessary to compile such a list. The minister will now be forced to take prompt steps not only devise a list of exempted motor vehicles. He will also need to notify the European Commission, incept regulatory provision for these vehicles to be ‘plated’ and to ensure that the MIB Uninsured Drivers Agreement encompasses claims arising out of their use. These are all preconditions of the power to derogate under article 5.2.

The Court also ruled that ‘the fact that a tractor, possibly with a trailer attached, may, in certain circumstances, by used as an agricultural machine has no effect on the finding that such a vehicle corresponds to the concept of 'vehicle' in Article 1(1) of the First Directive.’ The Vnuk ruling opens the way to arguments that third party cover extends to the use of a stationary tractor or other motor vehicle generating electricity or powering machinery, provided this is a ‘normal use’. Compare that with the much narrower definition within section 185 below.

One crumb of good news for motor insurers is that because the motor insurers liability for derogated vehicles is capable of being subordinated22 to other existing cover, such as under a household, employers or public liability policies, then the financial impact of the Vnuk ruling can be mitigated.

All accident locations are caught by the TPMI requirement

Although the Court’s characteristically elliptical judgment does not expressly rule that the geographic scope of the duty to insure extends to private property, such as the farm yard where Mr Vnuk was injured, this is the inescapable conclusion to be drawn from the Court’s judgment23. It is inherent in the broader concept that any kind of motor vehicle use, consistent with its normal function, must be covered by insurance.

Flawed UK statutory and extra statutory provision

It will be readily appreciated that sections 143 and 145 of the Road Traffic Act 1988 restrict the duty to take out third party motor insurance and the scope of cover to be provided by authorised motor insurers in the United Kingdom to the ‘use of a motor vehicle on a road or other public place’. These restrictions conflict with the wider scope required by the motor insurance directives.

These same restrictions in the scope of the duty to insure also impact on the Uninsured Drivers Agreement 1999 or the Untraced Drivers Agreement 2003. This is because these agreements inherit the same defective restrictions in geographic and technical scope that are grafted on directly from the Road Traffic Act 1988.

Closing the gaps in protection

Under a conventional naive UK centric interpretation of UK law24 all those injured by motor vehicles in private lanes and car parks, gated communities and private caravan sites are (wrongly) excluded from the compensatory guarantee provided under the various schemes for which the Secretary of State for Transport is also responsible. The same applies to anyone injured on a public road by a motorised vehicle not intended or adapted for road use.

The UK’s current national law provision is not only unlawful but it is also lacks common sense. When the life-time compensatory needs of a chronically injured victim can amount to many millions of pounds, what good is served by exposing these motor accident victims to these arbitrary restrictions? One way or another, the tax payer always funds the bill, the only uncertainty being the extent to which motor insurers are able to evade their proper responsibilities in what is a highly regulated and artificial market.

Failings at the Department for Transport

Early last year, the Secretary of State for Transport was warned (in the responses to his own consultation on the MIB Agreements) that the UK statutory and extra-statutory provision for road accident victims contained a large number of defects that breached the minimum standards of protection required under EU law. This included a detailed explanation as to why the geographic and technical scope of the insurance obligation within the Road Traffic Act 1988 was too narrowly confined25. The minister chose to do nothing. The Vnuk ruling confirms that these warnings were correct.

The minister's inaction is unacceptable not only for those unfortunate enough to be motor accident victims but also for the motor insurers that underwrite the cost of compensating these victims. The minister needs to discharge his constitutional duty to implement European law and this involves articulating a clear and Community law compliant policy that will confer proper compensatory safeguards and enable insurers to revise the terms of their policies and to set appropriate reserves. The Vnuk ruling will compel the minister to act and we can expect urgent revisions to Part VI of the 1988 Act early in 2015.

Vnuk’s wider implications

The Vnuk judgment confirms that the use of a farm tractor as an article of farm machinery26, on private land27, is capable of falling within the scope of the compulsory third party insurance requirement. In explaining its reasoning, the CJEU has also elevated the European law protective principle28 to an equal status with the objective of ensuring the freedom of movement of vehicles and people within the EU. The judgment also explains how the second and third directives on motor insurance served to progressively restrict the discretion enjoyed by member states to implement their own standards of protection in this area.

The promotion of the protective principle in the Vnuk decision goes much further than justifying and explaining the extensive geographic and technical scope of the third party insurance obligation. It is a policy aim that is justified in its own right.

It will be recalled from the above that the Vnuk case was preceded by a consistent line of CJEU rulings29 that have gradually restricted the freedom of member states to carve out their own exceptions to or restrictions in TPMI cover extended to passengers under these directives. These decisions were also based on a purposive or teleological approach that seeks to give effect to the same European law protective principle30.

In the operative and concluding part of its judgment in Vnuk, the CJEU ruled:

Article 3(1) of Council Directive 72/166/EEC of 24 April 1972 on the approximation of the laws of Member States relating to insurance against civil liability in respect of the use of motor vehicles, and to the enforcement of the obligation to insure against such liability must be interpreted as meaning that the concept of 'use of vehicles' in that article covers any use of a vehicle that is consistent with the normal function of that vehicle....’

It seems reasonable to assume from this that the same principle is capable of general application when applying the legislative intent of the Sixth Directive. Consequently, there seems a strong implication that the article 3 requirement that ‘any use’ made of a motor vehicle must be covered by compulsory third party insurance cover, means just that: any use31. In which case, the author’s earlier criticism32 of the Court of Appeal’s unanimous ruling in EUI v Bristol Alliance Partnership Ltd [2012] is vindicated33.

If we accept the general application of the protective principle, then provided a motor vehicle has some insurance cover in place, regardless of the contractual limitations that prevail between the insurer and the policyholder, it will be good for any claim arising out of any use that consistent with its normal function. Accordingly motor insurers cannot exclude liability to third party victims for deliberate damage34, road rage or because the driver is running a minicab service with a social and domestic user policy35.

A European law consistent interpretation of s151 of the 1988 Act leaves no room for a statutory motor insurer to posture as a so called ‘article 75 insurer’ when a correct application of the law obliges it to compensate the victim as though acting under its contractual indemnity; still less to impose the notoriously unfair and arbitrary terms of the Uninsured Drivers Agreement 1999 on the hapless victim.

Motor accident victims, and consumers of motor insurance policies, and are being short changed and it is time that we did something about it. Happily the solution is readily to hand. All that is required is for legal professionals to reacquaint themselves with the directives and to demand a European law consistent application of our national law to cure these defects, and failing that, to claim damages from the Secretary of State under the Francovich principle. However, it is also clear that urgent training is needed if fee earners are to be equipped to spot the numerous instances where our UK national law provision in this area fails to conform with the minimum standards of compensatory protection required under European law and how to challenge them effectively and profitably.

The European Commission is currently investigating over forty potential infringements of these directives36.

Practical implications

Our national law provision works satisfactory enough in in 90% of cases, if not more. The overwhelming majority of motor claims are against defendants who are entitled to a contractual indemnity from their insurer, so the insurer’s liability to indemnify the policyholder and to satisfy the claim is not at issue. However, there are glaring gaps, as the Vnuk ruling makes explicit, where our UK law fails to offer any compensatory protection at all where the victim is injured by an unusual vehicle type or on private property. Furthermore there is also a plethora of flaws, over forty, where our national law provision fails to meet European law minimum standards in the quality of the protective principle. These range from unlawful exclusions or restrictions of cover to highly prejudicial procedural impediments that either dilute the compensatory protection for victims or in extreme circumstances deny it completely.

There is also the problem caused by our defective national law implementation as it affects the growing incidence of fraudulent misuse of insurance by some drivers. Whilst recent initiatives by insurers and the State against uninsured driving have discouraged the more flagrant use of vehicles without any insurance in place at all, the misuse of insurance through unauthorised use of vehicles or bye practices such as ‘fronting’37 of insurance appears to be on the increase. Breaches of a policy term often result in insurers treating an ostensibly insured incident as though no insurance cover exists. This practice acquired a new authority following the Court of Appeal’s ruling in EUI Ltd v Bristol Alliance Ltd Partnership [2012] which endorsed the common practice of insurers in raising contractual breaches against third party claimants, save where expressly precluded under s148 and s151 of the 1988 Act38. That ruling is misconceived since the qualified nature of the UK compensatory guarantees that it advocates is incompatible with the comprehensive nature of the European law protective principle that requires full compensatory cover to be extended to third parties, save where expressly excluded by the directives39.

Under European law, and subject to the single permitted exception that applies to a passenger who voluntarily allows himself to be carried in a vehicle that he or she knows to be stolen40, once a TPMI policy is issued, as far as a third party victim is concerned it is good for any use made of the vehicle. European jurisprudence does not recognise, still less permit, the UK practice of discriminating against victims of insufficiently insured drivers.

The basic precept of European law on TPMI cover is that requires that cover to be good for any use.

Fitness Check

Every RTA and motor insurance liability text book is badly out of date on this topic and they have been for some time.

Law firms specialising in this field of practice would be wise to undertake an urgent review of their fee earners’ understanding on motor insurer and MIB liability issues. They should check whether their lawyers are aware of the yawning implementation gap between the UK’s statutory, extra-statutory implementation of these directives.

They might usefully enquire:

  • Whether the firm’s case management software reflects a European law consistent interpretation of the nature, scope and extent of the TPMI requirement.
  • Whether the lawyers who select, approve and risk assess cases appreciate the significance of the CJEU rulings in Bernaldez in 1996 and now Vnuk in2014.
  • The same applies to those how have a responsibility for marketing and liaising with introducers of work.
  • Whether their lawyers appreciate that many long-honoured leading authorities are misleading or unreliable because they fail to apply the CJEU’s interpretation of the directives?41 Do they realise the dangers of blithely accepting the extensive body of UK case authorities that apply a restrictive and literal interpretation of our law?
  • Many other authorities are rendered obsolete by Vnuk; do they know which ones42?
  • Whether their lawyers, including paralegal staff, who have day to day contact with clients possess the necessary legal know-how and the confidence to decide these issues for themselves and to apply a European law consistent interpretation of our law without incurring the delay and potentially unrecoverable cost of instructing counsel’s?

Unless a firm’s legal teams are familiar with: articles 143, 344, 545, 946, 1047, 1248, 1349 and 1850; the relevant recitals that explain them; as well as the extensive body of CJEU rulings whose interpretation has developed their meaning and reach, as well as the European law principles of equivalence and effectiveness, direct and indirect effect of directives – then their staff are unlikely to be able to accurately identify the flaws in our national law provision that allow insurers to exploit these loopholes and which by the same token create such excellent opportunities for successful, well remunerated legal challenges.

Furthermore, if practitioners are not familiar with the techniques of a consistent European law interpretation, nor comfortable with the legal authorities that oblige our UK courts to apply this technique51 and the multifaceted criteria for establishing a viable Francovich claim, then they will not be able to distinguish between a technical breach and one that has sound prospects of success.

There are also risk management issues presented by case management systems and lawyers applying the wrong legal criteria to individual case facts.

The good news is that the European law issues are relative easy to understand. Professional support lawyers and training managers will find that the academic principles are best absorbed if demonstrated and applied through simple practical workshops featuring realistic scenarios. Staff can be encourage to participate in a ‘before’ and ‘after’ approach to different situations.

Points to take away

  • Vnuk is good news for claimants and those who represent them;

  • It is bad news for insurers who have been lulled into a false sense of security by the Government’s inaction. Reserves and pricing will need to be reviewed. Any increase in premiums is likely to be subjected to close scrutiny from the Parliamentary Select Committee for Transport, if not from the DfT itself.

  • The scope of compulsory third party motor insurance has the potential to extend to:

    • any motor vehicle type;

    • to any use (provided it is consistent with its normal function);

    • anywhere, whether occurring on private property, off road, in a field, on a lawn or, as in Vnuk, in a farm yard.

  • The European directives on motor insurance ranks the objective of protecting victims equally to that of liberalising the movement of people and vehicles.

  • Much of our national law provision for guaranteeing the compensatory safeguards of accident victims is unlawful or misleading because the UK government has permitted numerous qualifications to the basic protective principle and these infringe European law.

  • Millions of TPMI policies fail to comply with European law minimum standards of cover, leaving the Secretary of State exposed to infringements actions, judicial review and Francovich actions52.

  • We cannot take any of our national law provision in this area at face value, it is safest to assume that it is defective;

  • These defects affect not only our statutory53 and extra-statutory provision54 but much of the case law interpreting this domestic law provision;

  • Our national law provision in this area must always be construed in the light of the Directives, now consolidated in the Sixth Directive55 and the relevant ECJ rulings; not just when the meaning is unclear but always;

  • These directives and the ECJ rulings interpreting them are our primary sources of law. Ironically, it is this EU law that brings us much closer to the original UK Parliamentary concept of a comprehensive guarantee scheme envisaged under the Road Traffic Act 1930 than the much adulterated regime we have to contend with now;

  • Whole rafts of familiar authorities that differentiate between:

    • public and private land56;

    • different vehicle types57;

    • authorised and unauthorised use58;

    • permissible and nullified or void exclusions and restrictions of contractual liability59;

.......are either defunct or at the very least of questionable authority.

  • It is no longer apposite to describe this area of tort law as ‘RTA’ practice– the potential scope of a motor insurer’s liability extends beyond ‘accidents’ and ‘roads’, thanks to the broad terminology employed in the Sixth Directive and its predecessors and, of course, Vnuk;

  • The DfT’s shambolic transposition of this European law presents excellent opportunities for successful and highly profitable legal challenges - for those who know what they are doing;

  • Legislative reform of some kind is imminent. However, the rights of injured victims under European law are not dependent on the caprice of Euro-sceptic administration; ultimately they are enshrined by Treaty obligation and so, with the right skills set, claimant lawyers have the ability to ensure that their clients’ full compensatory entitlement is upheld;

  • Competence in all facets of European law that affect, directly or indirectly, the legal entitlement of motor injury victims is not a counsel of perfection but a basic indicator that an individual is fit to practice in this field;

  • Fresh, clear and independent thinking is needed along with a working knowledge of EU law.

  • We are all European lawyers now!


Nicholas Bevan
is an award winning solicitor, formerly senior counsel at Bond Pearce. He is a nationally acclaimed commentator and presenter on motor insurer liability, asbestos related claims and regulatory compliance. He leads the campaign for wide ranging reforms to the United Kingdom’s compensatory safeguards for motor injury and loss claims and he is extensively published on this topic. His campaign blog is NOTA BENE at http://nicholasbevan.blogspot.co.uk. Nicholas provides in-house training to law firms and presents regularly for APIL and MBL Seminars. Nicholas’ contact details are: This email address is being protected from spambots. You need JavaScript enabled to view it. Telephone: 07968 427134.

1 The CJEU has ruled that national laws cannot deprive the directives of thier effectiveness, see Candolin and Others v Pohjola and Others [2005] CJEU (Case C‑537/03 ECR I‑5745) para 28, see also Churchill v Benjamin Wilkinson and Tracy Evans [2011] CJEU Case C-442/10, para 48.

2 The author’s case comment on Churchill is published in the Journal of Personal Injury Law.

3 Practically every CJEU ruling on the nature and extent of the TPMI requirement feature accidents that predate the implementation of the Sixth Directive in October 2009. According these cases refer to the first three directives that developed the concept of compulsory TPMI within the European Community, these are: Council Directive 72/166/EEC of 24 April 1972; Council Directive 84/5/EEC of 30 December 1983 and the Council Directive 90/232/EEC of 14 May 1990.

4 This concerns a policyholder who is injured by someone whom he has permitted to drive his insured vehicle but where that person is not authorised to drive it under the terms of the victims’ policy. In Churchill, the policyholder was an impressionable teenager who succumbed to peer pressure by allowing an older acquaintance, whom he knew to be uninsured, to driver his car.

5 S151(8) of the 1988 Act confers on an insurer a statutory right of recovery where the policyholder has permitted the use of vehicle in breach of the terms of the policy.

6 ‘When a national court has to has to apply the domestic provisions which have been specifically enacted for the purpose of transposing an EU Directive intended to confer rights on individuals, the national court must presume that the Member State, following its exercise of the discretion afforded it under that Article, intended entirely to fulfill the obligations arising from the Directive concerned’ Bernhard Pfeiffer et al v Deutsches Rotes Kreuz, Kreisverband Walshut eV: Case C-397/01 to C-403/01; [2004] ECR 1-8835, para 110.

7 See the author’s case comment on Delaney published in the Journal of Personal Injury Law and his article Trial and Error, published in the New Law Journal, 20 April 2012.

8 The appeal is listed for February 2015.

9Bernaldez (C-129/94) [1996] E.C.R. I-1829; Ferreira v Companhia de Seguros Mundial Confianca SA 2000 ECR 1-6711; Case C-348/98; Candolin [2005] ECR I-5745 Case C-537/03; Farrell v Whitty 2007 ECJ Case C-356/05; and Churchill v Benjamin Wilkinson and Tracy Evans 2011 Case C-442/10.

10 Section 3 of the European Communities Act 1972

11 See Bernaldez, paragraph 42.

12Ferreira v Companhia de Seguros Mundial Confianca SA 2000 ECR 1-6711; Case C-348/98; Candolin [2005] ECR I-5745 Case C-537/03; Farrell v Whitty 2007 ECJ Case C-356/05; and Churchill v Benjamin Wilkinson and Tracy Evans 2011 Case C-442/10.

13 The Sixth Directive was not then in force, so the first three directives applied, as with the Churchill and Delaney cases.

14 Council Directive 72/166/EEC of 24 April 1972, now repeated in article 3.1 of the Sixth Directive (2009/103/EC ) of 16 September 2009.

15Vnuk, paragraph 46.

16 See paragraph 106 of Mr Justice Jay’s decision in Delaney [2014].

17 As the protective principle is now one of the two main objectives of these directives and as member states no longer enjoy any significant discretion in the scope or extent of the TPMI requirement, any detraction from these minimum standards is likely to be treated as a serious infraction, see Francovich and Others [1991] ECR I-5357 (Joined Cases C-6/90 and C-9/90), paragraph 35; Brasserie du Pêcheur and Factortame [1996] ECR I-1029 (Joined Cases C-46/93 and C-48/93), which is an important factor in establishing a claim for damages against the State.

18 Paragraph 59, Vnuk

19 Section 185 restricts the definition of ‘motor vehicle’ to ‘a mechanically propelled vehicle intended or adapted for use on roads’

20 For example: ride along mowing machines, mini-bikes, airport tugs, quarry dumpsters, most go-carts, golf buggies and certain invalid wheel chairs not specifically covered by specific regulatory provision.

21 i.e. because they are not intended or adapted for road use, see Burns v Currell [1963] 2 All ER 297A and Chief Constable of Avon and Somerset v Fleming [1987] 1 All ER 318.

22 Subordination is permitted under article 10.1 of the Sixth Directive.

23 In its concluding paragraph the court stated: ‘the concept of 'use of vehicles' in that article [viz article 3 of the both the First and the Sixth Directive] covers any use of a vehicle that is consistent with the normal function of that vehicle. That concept may therefore cover the manoeuvre of a tractor in the courtyard of a farm in order to bring the trailer attached to that tractor into a barn, as in the case in the main proceedings, which is a matter for the referring court to determine.’

24 That is to say an interpretation that does not give proper effect to European Law, an occurrence that is all too common.

25 For an extract from the author’s response to the DfT consultation paper see: http://nicholasbevan.blogspot.co.uk/2013/04/why-scope-of-dft-review-must-be-widened.html

26 As opposed to the sense of transporting people between destinations off-road, see Cutter v Eagle Star Insurance Ltd [1998] All ER (D) 481.

27 Compare with Hardy v MIB [1964] [1964] 2 All ER 587 or Brewer v Director of Public Prosecutions [2004] EWHC 355 (Admin).

28 Namely, of safeguarding motor accident victims’ compensatory entitlement, see paragraph 51 of Vnuk.

29 Case C-129/94 Ruiz Bernáldez [1996] ECR I-1829, Ferreira v Companhia de Seguros Mundial Confianca SA 2000 ECR 1-6711; Case C-348/98; Candolin [2005] ECR I-5745 Case C-537/03; Farrell v Whitty 2007 ECJ Case C-356/05; and more recently in Churchill v Benjamin Wilkinson and Tracy Evans 2011 Case C-442/10 and Csonka v Magyar Állam [2013] CJEU Case C 409/11.

30 See the footnote above for the extract from Bernhard Pfeiffer et al v Deutsches Rotes Kreuz, Kreisverband Walshut eV: Case C-397/01 to C-403/01; [2004] ECR 1-8835, para 110

31 Subject of course to the ‘normal function’ qualification.

32 JPIL case comment by Nicholas Bevan in JPIL issue 2 of 2012 and his article Marking the Boundary, 2013 J.P.I.L., Issue 3

33 This criticism was based on the Bernáldez line of CJEU rulings.

34 This was the exclusion clause relied on by the motor insurers in the EUI case to avoid their contractual and statutory liability to compensate the third party.

35 Recital 15 of the Sixth Directive is very clear on this: ‘It is in the interest of victims that the effects of certain exclusion clauses be limited to the relationship between the insurer and the person responsible for the accident.’

36 The complaint was filed by the author in August 2013, see: http://nicholasbevan.blogspot.co.uk/2013/08/complaint-lodged-at-european-commission.html

37 Fronting denotes the passing off of the driver as though insured under an existing policy: such as where a newly licensed driver is named as a secondary user under a policy in a parents name, when in reality he is the main and only driver.

38 For further comment on EUI, see later under Practical Implications.

39 See recital 15 of the Sixth Directive: ‘It is in the interest of victims that the effects of certain exclusion clauses be limited to the relationship between the insurer and the person responsible for the accident.’ and the CJEU ruling in Bernaldez (C-129/94) [1996] E.C.R. I-1829. For a detailed explication, see also Marking the Boundary, by Nicholas Bevan, Journal of Personal Injury Law, issue 3 of 2013, see also the four part series of articles under On The Right Road? by Nicholas Bevan, New Law Journal, 8 -21 February 2013

40 See Article 13.1 of the Sixth Directive which s151(4) of the 1988 Act fails to fully implement.

41 The CJEU is the supreme authority in these matters, see section 3 European Communities Act 1972.

42 See under the Points to take away heading below.

43 Definitions

44 The third party motor insurance requirement

45 Derogations

46 Minimum levels of cover

47 The role of the compensating body, i.e. the MIB

48 A hotchpotch of special categories of victims that adds little to the core protective principle other than to provide illustrations.

49 Sets out the single permissible contractual exclusion of liability

50 Confers the right to sue an insurer directly

51 We have moved on sinceMarleasing SA v La Comercial Internacional de Alimentacion SA [1990] ECR I-4135 - Case 106/89 and White (AP) v White & MIB [2001] UKHL 9 see the footnote above on the CJEU ruling in Pfeiffer.

52 That said, the imprecision of the wording employed within the directives to define the geographic scope of the TPMI requirement, the divergence within the different language versions and the different approaches to implementation adopted by different members states may well militate against a Francovich award. See Lord Clyde’s House of Lords judgment in R v Secretary of State for Transport, ex parte Factortame Ltd and others [2000] 1 AC 524.

53 Part VI of the Road Traffic Act 1988 and the EC Rights Against Insurers Regulations 2002.

54 The Uninsured Drivers Agreement 1999, the Untraced Drivers Agreement 2003 and the so called Article 75 procedure.

55 The Sixth Motor Vehicle Insurance Directive (2009/103/EC) of 16 September 2009.

56 The test in Harrison v Hill 1932 J.C. 13; 1931 S.L.T. 598 has no relevance to the TPMI cover required under a European law consistent interpretation of our national law.

57 For example the test for determining whether a motor vehicle is caught by the TPMI provisions of what is now the 1988 Act, in Burns v Currell [1963] 2 All ER 297A is redundant. The House of Lords reasoning on the restrictive interpretation to be given to the term ‘territory’ in article 3 of the First (now Sixth) directive on motor insurance, in Clarke v Kato and Cutter v Eagle Star Insurance Ltd [1998] All ER (D) 481, is now wrong.

58 See: Gardner v Moore 1984 UKHL, Keeley v Pashen [2004] EWCA Civ 1491, AXA Insurance UK plc v Norwich Union Insurance [2007] EWHC 1046; EUI Ltd v Bristol Alliance Ltd Partnership [2012] EWCA Civ 1267

59 See in particular EUI Ltd v Bristol Alliance Ltd Partnership [2012] EWCA Civ 1267 that argues that with the exception of those exclusions expressly excluded under the 1988 Act an insurer has a free hand to exclude or restrict its liability to compensate a third party under s151 and which justifies this assertion by erroneously limiting the general application of the CJEU ruling inBernaldez (C-129/94) [1996] E.C.R. I-1829. Bernaldez expounds the protective principle which the Vnuk ruling has elevated to rank as a dual objective with liberalising the free movement of vehicles and persons throughout the EU.

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