Compulsory Motor Insurance in UK Post Brexit
11 March 2021
On 21st February this year, UK Transport Secretary Grant Schapps announced plans to stop following the 2014 Court of Justice of the European Union (“CJEU”) decision in the case of Vnuk.
Grant Schapps said: “We have always disagreed with this over-the top law that would only do one thing – hit the pockets of hard-working people up and down the country with an unnecessary hike in their car insurance. I am delighted to announce that we no longer need to implement it.”
To begin to understand what all the fuss is about, we need to look at the background to the Vnuk case and the CJEU decision.
Mr. Vnuk was injured when he fell off a ladder, which was hit by a trailer hitched to a reversing tractor. He was working on a farm, stacking hay bales in a barn. He sought compensation from the tractor’s insurers. He lost his case in the Slovenian courts as it was held that the insurance did not cover the tractor’s use when manoeuvring a trailer into position in a farm yard. Insurers had argued that the tractor was being used as a machine and not a vehicle.
The case was referred to the CJEU. In Damijan Vnuk v Zavarovalnica Triglav C-162/13, the CJEU decided that compulsory motor insurance has to cover any accident caused in the use of a vehicle that is “consistent with the normal function” of that vehicle.
Under the provisions of Article 1 of the Sixth Motor Insurance Directive (“MID”) [European Directive on motor insurance: 72/166/EEC], the court was satisfied that the tractor / trailer was a vehicle. Furthermore, the court ruled that the concept of “vehicle” within the meaning of the MID bore no relation to its use. The court decided that the tractor in this case was reversing which was consistent with its normal function.
Implications of the decision for the UK
The Road Traffic Act 1988, and its Northern Ireland equivalent, the Road Traffic (Northern Ireland) Order 1981 [as amended] provide that compulsory motor insurance must cover “death of or bodily injury to any person or damage to property caused by, or arising out of, the use of the vehicle on a road or other public place….”
The UK statutes were enacted to comply with Article 3(1) of the MID which requires that “Each Member State shall … take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance.”
The upshot of the CJEU decision in Vnuk is that “where” a vehicle is being used is no longer relevant in deciding the necessity for compulsory insurance. Instead the key question is how it is being used and whether that use is consistent with the vehicle’s normal function.
The decision caused significant concern in the UK. Broadening the scope of the compulsory insurance requirement to cover use away from the “road or other public place” was seen as creating numerous problems for Insurers, the public, and Motor Insurers’ Bureau [MIB], which is the UK body responsible for the management of compensation claims arising from accidents caused by uninsured or untraced motorists.
The decision opened up the prospect of compulsory motor insurance being required for motorsports events and for the use of motor vehicles on private land. Other vehicles / machines which came within the scope of compulsory motor insurance included, inter alia, ride-on lawnmowers, mobility scooters, Segways, even fairground dodgems and certain children’s toys.
Response of UK Courts and possible requirement for legislative change
The Government statement of 21st February 2021 confirms that it will be bypassing Vnuk, yet no mention is made yet of proposed amendment of current Road Traffic legislation or the introduction of new legislation to exclude the impact of Vnuk in the UK.
It should be pointed out that the UK judiciary has already extended the MIB’s liability to meet claims for uninsured motor accidents on private land. The Court of Appeal of England and Wales in the 2019 case of MIB v Lewis ( EWCA Civ 909) unanimously upheld the decision of the High Court, which had awarded damages to Mr. Lewis for severe and life changing injuries caused when he was knocked down in a field by an uninsured vehicle driven by a local farmer. The MIB was brought into the claim and disputed liability on the basis that the incident took place on private land, arguing that this meant the claim was not covered by the terms of the Uninsured Drivers’ Agreement 1999.
The High Court found that the MIB is an “emanation of the state” and therefore the MID has direct effect against the MIB, to the extent that the MID and EU law is clear and precise. Cover would be required as applied in Vnuk.
The Court of Appeal held that, following the Vnuk decision, the MID clearly required insurance cover to be in place for use of vehicles on private land. Where the insurance requirement was not met, the guarantee body, i.e. the MIB, was liable to meet the claim.
The Supreme Court refused the MIB permission to appeal in 2020.
It is submitted that in light of the above, the judiciary has clearly expressed its views on the application of the Vnuk decision.
Now that Brexit has occurred, does the MIB –v- Lewis decision still have application, notwithstanding the recent Government statement?
The European Union (Withdrawal) Act provides that any rights available before the date of exit remain recognised and available in domestic law. There is specific reference to rights arising as part of EU Directive, which have been recognised by any court or tribunal in the UK in a case decided prior to exit.
In Lewis, the High Court and Court of Appeal, as stated above, confirmed that MID had direct effect and that the EU law was clear and precise.
Looking at the Government website article on the subject, it would appear that the Government is trying to argue that there is compliance with compulsory insurance requirements and that “the Vnuk rules are considered unnecessary as there are already insurance packages available to Brits [sic] that cover certain risks on private land.”
Notwithstanding the above, it would appear that specific legislation will be required to end MIB’s liability for claims involving uninsured vehicles on private land.
Summary of Government Statement
The Government wasted no time in stressing the benefits, financial and otherwise, arising from its decision, making the following specific points:
- Drivers will avoid an estimated £50 a year increase in motor insurance costs;
- The Vnuk law requires a wider range of vehicles than those such as cars and motorbikes to be insured, including ones previously not requiring insurance, such as golf buggies, mobility scooters and quad bikes;
- The law also extends to vehicles on private land, meaning people with a ride-on lawnmower at home would require insurance where it would have previously not been needed;
- Had the EU law been implemented in Great Britain, it would have meant the insurance industry would have been liable for almost £2 billion in extra overall costs. These costs would likely have been passed onto their customers.
- Bypassing Vnuk will protect the existence of the UK’s “world-leading” motorsports industry. It is argued that EU rules would have meant any motorsports collision involving vehicles ranging from go-karting to F1 would have been treated as regular road traffic incidents requiring insurance. This could have decimated the industry due to the additional insurance costs of roughly £458 million every single year. Scrapping the rules will save the industry from potential collapse and will secure hundreds of thousands of jobs in the sector in the process.
I suspect that we have not heard the last of the Vnuk decision just yet.
Watch this space.
If you have any queries, the Defence Insurance Litigation team at Carson McDowell would be happy to help.
*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.