Dr Nicholas Bevan

Dr Nicholas Bevan

Tuesday, 23 April 2013


The scope of the statutory duty to insure

The legislative principle
That all victims suffering injury or loss caused by the use of a motor vehicle within the United Kingdom should be covered by third party motor insurance. The legislative objectives of the 1930 Act require this and article 3 of the Sixth Motor Insurance Directive (the Directive) insists upon it.

National law implementation
The duty to insure imposed by sections 143 and 145 Road Traffic Act 1988 only extends to public roads and places.  Furthermore it only applies to vehicles intended or adapted for use on a road.  In France, for example, the duty to ensure covers all motorised vehicles, whether on private or public land.

  • A child playing in a private forecourt that leads onto a public highway, or in a private campsite, or on a private lane leading to a hamlet or cul de sac would not be covered by the compulsory insurance provision of the 1988 Act.  As the Uninsured Drivers Agreement only applies where there is a duty to insure, the victim would be unlikely to receive the majority of any significant compensatory award.

  • A pedestrian knocked down by a scrambler bike taking a short cut home from an off road competition would neither be covered under the 1988 Act nor under the Uninsured Drivers Agreement. 

  • Someone injured through the unauthorised use of a vehicle exempted from the duty to insure by section 144 of the 1988 Act  (such as those owned by the Ministry of Defense, the Police and local authorities).   Whilst there are good reasons or exempting institutions that are effectively self-insuring, our national law makes no provision to guarantee the compensatory entitlement of victims where unauthorised use has been made of such vehicles. Take for example a local authority employee who lends a works’ van to a friend for the day, without obtaining the employers’ permission.  Any loss sustained by that driver’s negligent driving would leave its victim unable to recover any compensation from the local authority nor indeed from the Motor Insurers Bureau under the Uninsured Drivers Agreement, because the incident was did not arise out of an insurable event. Article 5 of the Directive requires specific provision to ensure that victims are not left empty handed.

The extent of the insurers statutory duty to indemnify its policyholder

The legislative principle
This is imposed on motor insurers under section 151 Road Traffic Act 1988. The principal objective of imposing a duty to insure motor vehicles is premised on the assumption the insurance cover is fit for purpose.  Accordingly it follows that motor insurance policies issued under the 1988 Act should provide third party cover that extends to any use of the vehicle and an insurer should not be able to raise potential or actual breaches of policy term by its policyholder as an excuse for not satisfying genuine third party claims. 

In other words, an innocent victim’s compensatory guarantee should be inviolate. This is what is required by article 3 of the Directive.  Article 13 goes on to provide the only exception to this blanket requirement.  This applies where a victim is a voluntary passenger in a stolen vehicle and knows that is so. Few of would argue with that.

National law implementation
Section 148 of the Road Traffic Act 1988 lists a handful of instances of policy exclusions that are void as against a third party claimant but this opens the door to insurers to successfully argue that all other exclusions are enforceable against an innocent third party victim.

According to a recent Court of Appeal ruling, whilst the user of a vehicle has a duty to ensure that any use made of the vehicle on a road or public place is covered by a suitable third party insurance policy; an insurer is free to impose any restrictions it likes, save where expressly precluded by statute.

  • An insured driver of good repute suffers from an acute bout of depression and attempts to commit suicide by crashing his car into a large department store.  In doing so, he unintentionally injures another driver as his car loses control before crashing into the targeted building.  According to the Court of Appeal the driver’s use of the vehicle fell outside the scope of his insurance cover making him an uninsured driver. This contrast with Community law which requires that motor insurance cover for third party victims should be good for any use made of the vehicle; notwithstanding any breach of contract by the policyholder.  The Court also opined that the extensive property damage is not covered by the Uninsured Drivers Agreement, whereas in our respectful opinion article 10 of the Directive requires such loss to be covered by that scheme. This left the property owners without any recompense for the hundreds of thousands of pounds of damage to the building;

  • Most private motor insurance policies restrict the use of the vehicles in various ways, such as to ‘social and domestic purposes’.  What then of someone with such a policy who gives a colleague a lift to visit a client or customer in their own car during office hours? Under our national law they would be treated as uninsured and subjected to all the procedural trips and taps within the Uninsured Drivers Agreement as well as the risk of suffering a wrongful deduction to their compensatory entitlement.  This contrast with Community law as indicated above.

The compensatory guarantee for victims of uninsured and untraced drivers

The legislative principle
It is no coincidence that the first Uninsured Drivers Agreement dates back to the formation of the National Health Service in 1946.  The Government of the day was concerned to ensure that road users insurance policies should also cover uninsured driving. It achieved this by mutualising the risk presented by uninsured and untraced drivers through the agency of the Motor Insurers Bureau (MIB), which was incepted at the same time. From 1946, every motor insurer underwriting business in this profitable market was required to pay a levy into a compensatory fund managed by the MIB.  The MIB was then obliged to compensate victims of uninsured drivers (later expanded to include untraced driver claims) on a like for like basis as though the claim were one against an insured driver. Under community law the MIB is required to offer an equivalent and effective compensatory regime to that afforded to victims of identified and insured drivers.

National law implementation
Hitherto the Department for transport has decided, rather than to codify the compensatory scheme in modern subordinate legislation,  to continue with its antiquated private law Agreements with the Motor Insurers Bureau. The Uninsured Drivers and Untraced Drivers Agreements share many defects in common.
Some of the most significant defects in the Uninsured Drivers Agreement are:

  • The unjustified exclusions of liability under clause 6.  These include exclusions of certain types of loss otherwise permitted under normal civil law damages assessment rules.  It also excludes liability altogether in certain accident scenarios on the ground that a claimant is partly responsible for their own loss.  The latter provisions have no regard to the Law Reform Contributory Negligence Act 1945 that empowers a court to reduce an award to such extent as the court thinks just and equitable having regard to the claimant’s share in the responsibility for the damage.   

  • The requirement, imposed as a condition precedent of any liability, that all claimants should complete the MIB’s own very detailed claim notification form, when the form itself has recently been changed so as to require applicants to supply unwarranted and wide ranging mandate that provides access to highly personal and privileged information in breach of article 8 of the Human Rights Convention; clause 7;

  • The imposition of numerous disproportionate and heavy handed procedural requirements imposed as conditions precedent to any liability within clauses 7 to 12.  These run a coach and horses through the overriding objective of Article 10 of the Directive.  To its credit, the Department for Transport’s review paper makes proposals for mitigating or removing most of these;

  • A bizarre penalty imposed on an innocent victim should he or she fail to request the other driver’s insurance details or to pursue a formal complaint to the Police, where there are in fact no insurance details to disclose in the first place, under clause 13.  Here again, the review paper sensibly proposes this provision be discarded;

  • The power to deduct from the compensation any other sums received by a claimant as a result of the accident, clause 17;

Leaving to one side the numerous procedural strike-out clauses that have blighted the prospects of many claims over past decades, and which the Department for Transport now accepts should be removed, I list just a few instances of the kind of injustices permitted under the Uninsured Drivers Agreement:

  • The refusal to reimburse sick pay advanced to an injured employee;

  • The rejection of credit hire charge claims;

  • The refusal to reimburse medical and treatment costs funded through a health insurance plan;

  • The deduction of any sums received gratuitously or coincidentally under a personal accident or health insurance scheme;

It should be noted that under the normal civil law rules, such sums are properly recoverable.

In other instances the MIB has sought denied any liability to compensate in circumstances where:

  • The victim reasonably but mistakenly thought the defendant driver was insured and that the insurance details provided were valid and who thus failed to report the drivers failure to provide his insurance details,
  • Teenagers who have unwisely accepted lifts from friends in circumstances where a wiser older person would have enquired whether the driver was insured.

This is by no means intended as an exhaustive list.

It should be evident from the above that any proper review of the Uninsured and Untraced Drivers Agreements must also take into account the statutory context in which they operate (which is itself defective in that it fails to adhere to the original legislative objectives or to comply with superior Community law). This is why the DfT's review needs to be widened.

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