Compulsory motor insurance is Vnuk'd
28 November 2017 28 November 2017
UK & Europe
Insurance & Reinsurance
In a long awaited judgment, the High Court has called for the UK to extend compulsory motor insurance to vehicles used on private land.
The decision could have widespread implications for corporates, who may have to insure a whole host of different vehicles, such as forklift trucks and golf buggies, for the first time. This is not specifically a UK issue, as this decision is based on a European decision and potentially the compulsory motor cover requirements will be EU (and UK) wide.
In RoadPeace v Secretary of State for Transport and MIB, the claimant road safety charity alleged various provisions of UK law governing compulsory motor insurance contravened EU law following the European Court of Justice's (ECJ) interpretation of the Motor Insurance Directive (MID) in the 2014 Vnuk case.
Vnuk was a Slovenian case that involved a tractor being manoeuvred in a farm courtyard when it hit the ladder the Claimant was stood on, causing him injury. The matter was referred to the ECJ which extended the definition of 'use of a motor vehicle' to include any use that is consistent with the vehicle's 'normal function'; which is not limited to use of the vehicle as transport on a public road. The ruling has been interpreted as requiring compulsory insurance for any vehicle used on private property, which is currently inconsistent with UK law.
Perhaps unsurprisingly in light of the ECJ's interpretation, the High Court held that compulsory motor insurance in the UK applied to any vehicle being used anywhere, for any purpose for which it was intended. Current compulsory insurance restrictions requiring a vehicle to be "intended for use on roads" or to its use "on a road or public place" are not permitted under MID. The judge concluded that an appropriate declaration to this effect should be granted, although no timetable has yet been set for amending domestic legislation.
Whilst there is no impact on UK motor insurance arrangements at present, recent UK decisions have already begun to widen the scope for motor insurance as a result of Vnuk. In UK Insurance Ltd v R&S Pilling, it was found that damage to premises caused by fire resulting from repairs being carried out to a vehicle was covered by that vehicle’s motor insurance. In Wastell v Woodward it was held that a hamburger van parked in a layby, with the purpose of conducting a business, constituted use of a vehicle on the road.
In light of this developing body of domestic and European law, the increased cost and administrative burden on businesses is becoming ever more acute. Such a wide ambit includes many vehicles traditionally insured under EL / PL policies, calling into question the need for such wide ranging provisions. Other risks, such as mobility scooters, arguably don’t need explicit motor cover at all. Accordingly there is a need to bring certainty to this area of the law and for the exact remit of the Vnuk judgment to be clarified.
Both the UK and Brussels have consulted on the Vnuk problem. In their most recent 2017 consultation the European Commission sought views on four alternative options for amending the MID. No preference was given by the European Commission, which is contrary to their previous consultation in which they preferred to amend the scope of the Directive to the use of vehicles 'in traffic'.
This could be a worrying development that will have ramifications for EU insurers and corporates if the EC moves away from the business as usual option. Industry bodies have already raised concerns about the consultation, believing the amended Directive option, which will require drivers to hold third party insurance whilst driving on public land, will be difficult to enforce and could lead to increased fraud. Indeed it may provide a fresh hunting ground for claimant solicitors and claims management companies seeking to secure new revenue streams as historical business lines dry up, ultimately leading to an increase in costs.
European insurers and guarantees funds have advised they favour the “in traffic” amendment to the MID, to reflect a narrower compulsory insurance obligation than is implied in Vnuk. It is to be hoped that the weight of responses from these insurers and government bodies is persuasive and the European Commission adopts this sensible and workable approach as soon as possible to this runaway area of the law.
This is not an issue that will disappear with Brexit. The harmonisation of motor insurance across Europe, in order to ensure equivalency of motor policies, may require the UK to remain within the previsions, whatever they may be. In this scenario, we will have the added uncertainty of the status of ECJ decisions past and present to contend with, and risk managers will have to consider the additional cost of adding additional classes of vehicle to their motor insurance cover.