Thursday, 25 April 2013
EXTRACT FROM MY DETAILED RESPONSE to the DfT review
Extract from Nicholas Bevan’s response to
the Department of Transport’s Review
of the Uninsured and Untraced Drivers Agreements.
Nicholas Bevan is a founding director and co-owner of Enable Law Ltd, a legal management, regulatory compliance and training consultancy. He is a non practicing solicitor. Nicholas has over twenty years experience of defending road traffic claims on behalf of insurers acting as agents representing the Motor Insurers Bureau. He has also represented many individual applicants. Nicholas has been consulted by APIL to advise on the need for reform in this area since 2007, when he met with the MIB to argue the case for reforming the 1999 Agreement. In 2008 he received the top award for ‘Outstanding Achievement’ at the Barker Brooks Personal Injury Awards. He is a nationally recognised legal trainer and speaker on claims involving the MIB and he is also widely published. Nicholas was recently senior counsel at commercial law firm Bond Pearce LLP.
The Department for Transport’s review is welcome as are many of its proposals, in so far as they mitigate some of the defects in the MIB Agreements. Unfortunately, the review confines its proposals to handful of issues, which are mostly procedural in nature. It does not tackle the imperative for substantive reform right across the UK’s statutory and extra-statutory provision for victims of insured, insufficiently insured, uninsured and unidentified drivers. Any comprehensive review of the MIB Uninsured and Untraced Drivers Agreements should have as its starting point the minimum standards of protection imposed under the Sixth Motor Insurance Directive. It should also embrace the UK’s statutory provision as the statutory and extra statutory schemes are closely interrelated.
This paper sets out the case for amending Part VI of the Road Traffic Act 1988 and the European Communities (Rights Against Insurers Regulations) 2002. It also recommends that the Uninsured Drivers Agreement 1999 and the Untraced Drivers Agreement 2003 should be replaced by a simpler, shorter, more cost efficient scheme: one that offers fairer provision for victims and which also complies with the minimum standards imposed by the Directive.
One of the primary objectives of the Road Traffic Act 1930 was to ensure that victims injured or sustaining loss caused by the use of motor vehicles could be confident that they would recover their full compensatory entitlement, regardless of the responsible party’s ability to satisfy the claim. Rather than opt for a state managed no-fault compensatory regime, the government of the day determined on legislating to ensure that all road users purchased insurance cover that would indemnify them against any third party claim. This policy drove extensive new and profitable business to a nascent motor insurance market that has developed into a sophisticated multi-billion pound industry.
Almost immediately it became apparent that the legislative objective was being undermined by motor insurers conflicting business interests that incentivised them to hedge their liabilities by restricting the terms and scope of cover within their policies. A number of legal challenges resulted and the reforms introduced under the 1934 Act reflected Parliament’s intention both to restrict the ability of insurers to hedge their liabilities in this way and to compel them to satisfy relevant judgments against their policyholders. Unfortunately, as this paper seeks to demonstrate, the simplicity of the original parliamentary objective has been compromised over the years, exposing third party victims to a number of loopholes in the compensatory protection afforded under our national law.
There are sound pragmatic reasons why our national law provision for third party motor insurance cover should be as comprehensive and as effective as possible. One need only consider how few private individuals could possibly expect to satisfy even a relatively modest judgment, of say £300,000, from their own resources; let alone a multi-million pound catastrophic injury claim featuring extensive future loss. It is a commonplace that motor vehicles are potentially lethal weapons and so it is not an unreasonable expectation in a modern state that their use should be made conditional on the user having full indemnity insurance in place. Whilst our national law provision achieves this for the most part, its effectiveness is marred by the ability of authorised insurers to equivocate on the terms of cover they provide. If one takes into account the relative vulnerability of individual claimants, the ability of insurance actuaries to set appropriate premium rates that deliver the necessary insurance indemnity and the legislative objective underscoring the compulsory insurance regime, there is surely a strong case to argue that authorised motor insurers who choose to operate in this market should be required to provide comprehensive and unqualified indemnity cover to all third party victims (without prejudice, of course, to any contractual right against their policyholder for breach of contract or misrepresentation).
Compulsory insurance also reduces the extent to which our hard pressed NHS, social services and local authorities are exposed to funding the seemingly ever increasing cost of medical treatment, rehabilitation, long term care, special accommodation and equipment needs of seriously injured road accident victims.
This paper puts the case for amending the statutory provision in this area to remove any anomalies and to bring our national law provision in line with the minimum standards imposed by the Sixth Motor Insurance Directive. It cannot be right that motor insurers, who enjoy a captive market under this legislation, should be permitted to evade their statutory responsibility to indemnify genuine third party claims or to effectively deflect potentially costly long term care costs to our state funded services.
Clarifying the scope and extent of the duty to insure and the statutory indemnity would also have the benefit of avoiding costly litigation. It will be observed that there has been a recent spate of trials in which the Court of Appeal has failed to adopt a consistent approach to the interpretation of Part VI Road Traffic Act 1988.
It is contended that the Uninsured and Untraced Drivers Agreements are part of our national law. However, the historical reasons for the dichotomy between the legislative and non-legislative provision for victims of motor vehicle use, no longer pertain. This paper makes the case for doing away with this inconsistent approach and for codifying the compensatory guarantee scheme within new subordinate legislation approved and maintained by the Civil Justice Council.
It is clear from the Government’s online hyperlinks to the MIB website that it wishes to encourage applicants to apply for compensation from the MIB direct. Unfortunately the cumbersome format of both the Uninsured and Untraced Drivers Agreements; their excessive use archaic technical terms, compounded by the inaccurate and in places self contradicting representations of legal entitlement, make them wholly unsuited to this purpose. Furthermore the agreements impose arbitrary and draconian strike out clauses that far exceed any sanction imposed on claimants pursuing insured defendants in our civil courts. They arrogate special evidential rules for which there is no legal or constitutional precedent and they entitle the MIB to make deductions from victims’ lawful entitlement that conflict with Community law. The extensive defects in these anachronistic arrangements are their own best advocate for their replacement.
This paper recognises the Motor Insurers Bureau’s expertise and proficiency in administering claims and the important role is has played over many years in compensating road accident victims. However it suggests a number of discrete reforms to make it more accountable and less prone to undue influence from the insurance interests that comprise its board.
[The main body of the consultation response follows, including the itemisation of over 30 instances where our statute law and the MIB Agreements fail to properly implement the higher standards of compensatory protection afforded to victims of road use. All this material is excluded from this excerpt]
A detailed response to The Department of Transport’s review is set out above. This paper argues that extensive and wide ranging reform of the UK’s statutory and extra-statutory compensatory protection for victims of motor incidents is necessary. A patch and mend approach to part of the UK’s extra statutory provision, is insufficient. This paper recommends that the Minister:
· Restore the original legislative objective of the Road Traffic Act 1930 (as amended by the 1934 Act) to ensure that all victims of insured motor vehicle users who under our national law are entitled to compensation for their loss or injury are to be automatically entitled to recover compensation from the vehicle’s motor insurers direct.
o This should apply wherever the accident occurs in the UK and whatever the circumstances of the incident.
o A third party victim’s right to compensation should be guaranteed and free from any policy term or other restriction in liability between the insurer and policyholder. It follows that authorised motor insurers operating in this market should be compelled by law to offer third party cover that is good for any use made of the vehicle and sufficient to address the legislative objective set out above.
· Codify and consolidate both the statutory extra-statutory provision for victims of uninsured and unidentified drivers so that they provide a consistent, clearly articulated, fair and just compensatory regime for third party victims of insured, insufficiently insured, uninsured or unidentified drivers alike.
· Adhere to the minimum standards of protection for victims of motor vehicle users imposed by the Sixth Motor Insurance Directive and Community law (which incidentally requires the full and comprehensive third party compensatory protection, save where expressly provided for).
However, the writer responds to the specific questions raised in the Department’s consultation paper as follows:
Answer: Some but not all of these suggestions are agreed.
I agree that the MIB should be joined as a party in any proceedings. Paragraph 5 of the Amended MIB Guidance already requires this.
I agree that the oppressive and largely unnecessary procedural requirements as well as the disproportionate sanctions set out in clauses 8 to 12 should all be removed. These provisions contravene the Community law principles of equivalence and effectiveness as they have no equivalent under the statutory provision within Part VI Road Traffic Act 1988. Their removal should not be dependent upon the imposition of any new notice requirement that differs in any material respect to the notice provisions for insured claims.
Applicants should be encouraged to submit a claim form within a reasonable time. However, the MIB should not be entitled to any superior rights (in respect of the sanctions it can impose in respect of pre action disclosure, notice or provision of information) over and above those enjoyed by any other party in our civil justice system.
The MIB is entitled to the same notice requirements and information on the commencement of proceedings as is conferred on an authorised motor insurer under s152 (1) Road Traffic Act 1988; and no more. The subtle but often fatal differences in the notice requirements in the current version of clause 9 should be removed as this is as unnecessary as it is confusing for litigants in person and has resulted in costly satellite litigation.
To recapitulate, the MIB is entitled to the same information, notices and remedies conferred on any other litigant under the Civil Procedure Rules and no more.
Answer: I agree that clause 13 must be removed. It is an unlawful restriction on the right to compensatory recovery as it is not an exception or limitation expressly provided for under the Directive.
Answer: 3 years from the date of the accident or from the applicant’s attainment of majority or cessation of disability. The MIB should not enjoy any superior notice or other privileges to those conferred on other defendants in this jurisdiction.
Answer: I agree. The standards and terminology employed within the Civil Procedure Rules should be adopted as closely as possible to avoid unnecessary confusion. The Community law principle of equivalence also requires this.
Answer: I agree.
The arbitrators should consist of barristers and solicitors with at least 10 years post qualification experience who can prove that their competence in handling road traffic accident personal injury claims that feature catastrophic and other serious injury claims involving significant future loss. My concern is that many practitioners are insufficient aware of the benefits of periodical payments.
Answer: Ill health, mental health problems, lack of communication of the award, lack of understanding of the information letter, lack of capacity or minority. The constructive knowledge provisions within s14 Limitation Act 1980 might also be employed. However none of this would be required if the compensatory regime was codified, as recommended, and made subject to normal limitation of action principles. The MIB should not enjoy any superior privileges to those conferred on other defendants in this jurisdiction.
Answer: The MIB should not enjoy any superior notice or other privileges to those conferred on other defendants in this jurisdiction. Suitable provision for recoverable legal costs is made to ensure that a claimant is properly represented and the outcome is fair. Note Andrews v MIB  EWHC unreported. Appeals from arbitration is already provided for under the Arbitration Act 1996. Furthermore there can be no bar to a Francovich action for breach of Community law.
Answer: Agreed, subject to the usual strike out rules.
Section 61 of the Arbitration Act 1996 should apply but amended to adapt the qualified one way costs rule in the claimant / applicant’s favour.
Answer:. Section 61(2) of the 1996 Act already makes suitable provision. Our national law principles of natural justice, equality before the law and the Community law principle of equivalence preclude any significantly enhanced penalties that favour the MIB over any other litigant in our civil justice system. The MIB should not enjoy any superior privileges to those conferred on other defendants in this jurisdiction.
Answer: The Secretary of State for Transport should continue to be involved, whilst this compensatory provision remains in its present anachronistic form. He is ultimately responsible for any departures from the full compensatory principle, for any injustices perpetrated by those who operate the scheme and for any departures from the minimum standards imposed under Community law.
I have seen the PIBA response to this particular question and I endorse its observations on the unsatisfactory experience of some claimants.
‘This is vital but does not go far enough.
Our members have personal experience of the MIB taking up to 12.5 years to make a decision in Untraced Drivers cases (see Auld v MIB 2012). There are appalling delays in some very large cases leaving victims uncompensated for the delay period and there is no method of forcing the MIB to fulfill their responsibilities.
What is needed is a clause which requires the MIB to act within a reasonable time scale and the victim should have the right to apply to the arbitrator to force the MIB to investigate and make a decision within a reasonable time scale. The maximum time from application to decision should be 3 years and the average time should be 1.5 years.’
I would add the case of Moore v SS for T & MIB  EWCA as another example where the MIB’s incompetent investigation of a genuine untraced driver claim arguably resulted in a substantial undersettlement and the resulting delay prevented the claimant’s Francovich claim.
I argue elsewhere that the current agreements should be codified and that the MIB should operate under a separate service level agreement. The MIB should be contractually obliged under that agreement to compensate applicants (on a sliding scale to reflect the value of the claim and the length of delay) for any unreasonable delay. Any factual disputes should be referred to an arbitrator. The MIB should be obliged to publish full claims handling statistics and list all the infractions that result in a penalty on its website.
Answer: I agree with PIBA response in so far as they propose a sensible level of disbursements for the provision of an expert legal opinion on the quantum of higher value claims and, I would add, extended to include any unusually complicated claims.
The quantification of high value claims, often involving detailed consideration of the respective merits of a lump sum or periodical payments or a mix, requires specialist expertise. It is important that a victim has independent advice, either from a solicitor or barrister with sufficient experience to provide a specialist opinion.
The case of Moore v SS for T & MIB  EWCA also demonstrates the need for independent advice and representation from an independent legal representative in order to ensure that suitable experts are appointed and properly instructed and that the claim is properly investigated. The tort law full compensation principle requires that the cost of preparing and advising in complicated or high value claims should be fully recoverable. The present fee matrix is insufficient to achieve this.
The principle within Part 1 of the Civil Procedure Rules of ensuring that the parties are on an equal footing requires that a claimant should have access to expert independent advice and representation from the outset of a serious or complicated claim and that this cost should be recoverable.
My recommendation would be:
· That in claims whose general and special damages combined are valued at less £10,000 the current fee matrix should prevail.
· That in claims valued at £10,000 and above:
o No additional cost of establishing liability should be allowed, save in exceptional or unusually complicated cases,
o However, inter parties costs on the appropriate standard basis (or where appropriate: the portal or fast track fixed costs, where these apply) should be allowed to every applicant but limited to work and expenditure incurred relevant to the investigation, preparation, quantification (and where necessary representation) of the applicant’s assessment of damages.
‘Yes. It makes no sense to allow access to advice from a specialist barrister only for a person who is a protected party. All persons with claims valued at more than £10,000 should be entitled to an advice on liability and quantum. The fees should be fixed as follows:
Value of claim Advice on liability and quantum from barrister
£10,000 - £25,000 advice on Liability and quantum after the MIB’s decision has been communicated: £500 + VAT.
£25,000 - £100,000: £750 + VAT.
£100,000 - £300,000: £1,500 + VAT
£300,000 upwards: to be assessed or agreed depending on the work involved.’
Answer: I agree that a claimant should be entitled to appeal to an arbitrator to challenge a refusal to award supplementary costs in claims valued over £10,000 and in complicated cases where the claimant can demonstrate the costs incurred were necessary and proportionate.
Answer: By removing that element of the costs that are attributable to investigating liability issues. See the answer to Question 13 above. It is anticipated that APIL, MASS, FOIL,the CJC and representative bodies for costs draftsmen will be better placed to advise the Minister on the details.
Answer: Yes. This is required by the Community law principle of equivalence.
Answer: Yes. These evidential presumptions have no basis in law anyway, at least in so far as they apply to claims under the 1999 Agreement as the rules of evidence in any contentious civil matter fall within the province of the Civil Procedure Rules, The Civil Evidence Act and the judiciary; not the MIB or the Minister.
Furthermore I argue in my paper that clause 6 requires extensive revision and that in its present form it fails to implement the minimum standards imposed under the Sixth Motor Insurance Directive. This also extends to the wrongful exclusions of liability and to the wrongful deductions from claimants’ compensatory entitlement (here and under clause 17).
I respectfully refer the Minister to my paper and more significantly to numerous rulings by the European Court of Justice in which it has repeatedly stated that any exceptions within the Motor Insurance Directives to the cover imposed under article 3 (and by implication article 10) are to be construed restrictively. The only lawful exclusions of passenger liability are those provided for (i) in the second subparagraph of article 10.2 and (ii) in the second subparagraph of article 13. Any extension in the scope of these exclusions is a breach of Community law.
I am unable to provide assistance in drafting a clause that is inherently unlawful.
Answer: None that I am aware of.
 See list of publications in the Appendix
 The concept of compulsory third party motor insurance was first introduced in Part II of the Road Traffic Act 1930, sections 35 to 40.
 Section 10 of the 1934 Act introduced the statutory indemnity and Section 12 specified policy restrictions that were void as against a third party claimant.
 This paper will demonstrate that there are geographic and other limitations on the duty to insure imposed under s143 Road Traffic Act 1988.
 2009/103 EC
 Discussed under Inconsistencies between UK and Community law below.
 See the discussion under the Procedural issues heading.
 See the discussion under the Substantive issues heading.
 See under The Motor Insurers Bureau heading.
 See under Proposals for Extra Statutory Reform.
 As under article 10.2 and article 13.1 of the Sixth Motor Insurance Directive.
 See Proposals for Extra Statutory Reform