Extract from Nicholas Bevan’s response to
the Department of Transport’s Review
of the Uninsured and Untraced Drivers Agreements.
INTRODUCTION
The Author
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[1]. Nicholas was recently senior counsel at
commercial law firm Bond Pearce LLP.
The limited scope of the review
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 response
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.
The wider issues
One of the primary objectives of the Road Traffic Act 1930[2]
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[3].
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[4],
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[5]. 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[6]
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[7] 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[8]. 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[9]. 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.[10]
.......................................
[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]
RESPONDING TO THE SPECIFIC PROPOSALS MADE
Preface
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[11]).
However, the writer responds to the specific questions
raised in the Department’s consultation paper as follows:
Answers
Question 1
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.
Question 2:
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.
Question 3:
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.
Question 4:
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.
Question 5:
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.
Question 6:
Answer: Agreed.
Question 7:
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.
Question 8:
Answer: Agreed.
Question 9:
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 [2012] 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.
Question 10:
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.
Question 11:
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.
Question 12:
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.
PIBA response:
‘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 [2008] 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[12]. 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.
Question 13:
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 [2008] 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.
PIBA response:
‘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.’
Question 14:
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.
Question 15:
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.
Question 16:
Answer: Yes. This is required by the Community law
principle of equivalence.
Question 17:
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).
Question 18:
Answer: No.
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.
Question 19:
Answer: None that I
am aware of.
[1]
See list of publications in the Appendix
[2]
The concept of compulsory third party motor insurance was first introduced in
Part II of the Road Traffic Act 1930, sections 35 to 40.
[3]
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.
[4]
This paper will demonstrate that there are geographic and other limitations on
the duty to insure imposed under s143 Road Traffic Act 1988.
[5]
2009/103 EC
[6]
Discussed under Inconsistencies between
UK and Community law below.
[7]
See the discussion under the Procedural
issues heading.
[8]
See the discussion under the Substantive
issues heading.
[9]
See under The Motor Insurers Bureau
heading.
[10]
See under Proposals for Extra Statutory
Reform.
[11]
As under article 10.2 and article 13.1 of the Sixth Motor Insurance Directive.
[12]
See Proposals for Extra Statutory Reform
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