Dr Nicholas Bevan

Dr Nicholas Bevan
www.nicholasbevan.com

Saturday, 6 October 2018

MOTOR INSURERS' BUREAU FIXED WITH STATE LIABILITY

Lewis v Tindale, Motor Insurers Bureau and Secretary of State for Transport [2018] EWHC 2376 (QB)


In Lewis v Tindale, MIB and SoS for Transport Mr Justice Soole held that the privately owned motor insurance consortium, the MIB, is fixed with state liability to compensate  accident victims who have been unlawfully excluded from the compulsory third party motor insurance regime imposed under  Part VI of the Road Traffic Act 1988.

This decision overturns Byrne v Motor Insurance Bureau in 2008 and, prior to that decision, a long held assumption that the MIB's liability for accidents occurring in the UK is exclusively defined by its contractual  obligations with the Secretary of State for Transport.

I have consistently argued, over many years, that the leading UK authorities on this issue were erroneous as they were based on the wrong application of European law on state liability and compounded by misleading and inadequate factual disclosure about the MIB.  The MIB has been liable for the UK government's failure to regulate the motor insurance industry in this way, for at least a decade but few were prepared to countenance this. My views were vindicated recently by the European Court of Justice's ruling in Farrell v Whitty (No.2) (Case C-413/15) [2018] 3 WLR 285 concerning the Irish Republic's MIB.  The Lewis decision shows that our profession has finally woken up to this important new legal remedy. 

The Lewis decision has far reaching, if potentially short-lived, implications.  It allows injured victims (affected by the UK government's failure to reform its statutory provision for third party motor cover) to bring it into line with the minimum standards of protection required under European law to sue the MIB direct.

This amounts to conferring an entirely new cause of action against the MIB. The claim depends on European law principles which, due to the primacy of European law, override the UK's defective implementation of EC Directive 2009/103/EC on motor insurance - at least, for as long as the UK is part of the EU.

A little history


Compulsory third party insurance was first introduced in 1930 in response to a growing problem.   Motor vehicles were becoming increasingly affordable and as motoring was no longer the reserve of the wealthy injured victims were exposed to the risk that individuals adjudged to be responsible for their injury could not be relied on to possess sufficient resources to satisfy the judgment. Rather than incept a state funded compensatory scheme, the government chose to compel vehicle owners and users to take out insurance against their personal liability to third parties. Compulsory insurance was introduced under the Road Traffic Act 1930.

In 1945 the motor insurance industry agreed to set up a compensatory body, the MIB, to meet claims by victims of uninsured drivers.  Every motor insurer agreed to become a member of the MIB and to fund its compensatory role and this was set as a precondition of their authorise status.  This motor insurance consortium has, over the years, assumed various other associated roles, including compensating victims of hit and run accidents as well as victims of foreign accidents within the European Union where the foreign insurer has failed to deal with the claim or where the vehicle responsible is uninsured or unidentified.

Unfortunately, the  motor insurance lobby and the MIB have combined to obstruct many necessary reforms to bring the statutory provision for compulsory motor insurance and the MIBs compensatory role up to date. The Department for Transports ineffective regulation of this area has allowed this multi-billion pound special interest group an alarmingly unconstitutional degree of influence at the general public's expense.  Motor insurance products are still hedged with unlawful exclusions and restrictions in cover and, compared with their continental competitors, they offer poor value for money as well as resulting in considerable legal uncertainty and unpredictable outcomes.  This has led to a growing disparity between the minimum standard of motor insurance cover required under European law and the insurance products sold in the UK.

The rationale


The reasons why European law empowers private citizens to sue organisations such as the MIB direct are twofold.  First, it is intended to prevent member states, such as the UK, from shirking their Treaty obligations and / or seeking to undermine the effectiveness of legal rights conferred on individuals under European law by outsourcing their responsibilities to third party agencies and thus washing their hands of responsibility.  It can be viewed as a measure of indirect self-enforcement: one that relies on national courts to adhere to the rule of law to bring errant governments to account; even if the primary defendant is an emanation of the state, as opposed to the minister of state ultimately responsible for the illegality. Second, it is to ensure that individuals are able to invoke rights wrongly denied them by their state's unlawful actions.


Lewis v Tindale

Mr Lewis was seriously injured by an uninsured driver in a field.  The MIB, rejected the claim on the basis that it was only liable to meet an unsatisfied judgment  where the incident involved is one that is subject to the compulsory insurance requirement under UK law.  It relied on the terms of the scheme it had negotiated with the Secretary of State to this effect.  However, European law does not permit member states to exclude private property from their compulsory motor insurance schemes.

The judge held that because the MIB was performing a public service and had special powers for this purpose beyond those exercised by ordinary individuals - it was to be treated as an emanation of the state and this pinned with the state's liability to compensate the victim.  He came to this conclusion by applying well established European law principles.

Hitherto, it was widely understood by most legal professionals that the MIB could not be held to be  liable in this way and reliance was placed on Mr Justice Flaux's ruling on this point in Byrne v Motor Insurance Bureau in 2008.  It is satisfying to note that the learned judge's ratio  closely follows my dissenting line of reasoning and the legal authorities I have relied on to support my thesis, as published in my various New Law Journal articles and also in this blog.

Follow this link for a transcript of the Lewis judgment: https://www.bailii.org/ew/cases/EWHC/QB/2018/2376.html

The implications


The decision confirms a new right of action derived from European law for the benefit motor accident victims injured in the following scenarios :

  • where the vehicle responsible is of an unusual type (e.g an  off-road vehicle, quad bikes etc) that is not subject to the motor insurance requirement under UK law
  • Where the incident that occurs on driveways, parking areas or other private areas that are also not subject to the compulsory motor insurance requirement under UK law
  • Where the accident was caused not by the driver but by a mechanical or software defect in the vehicle not attributable to the negligence or other fault of the vehicle's owner or driver, again because under UK law third party cover only needs to insure against the personal liability of the user or owner.

Unfortunately, as this right is based on European Law and the primacy of that law, accident victims will probably lose this new right on 29 March 2019 when the UK leave the EU.

My latest New Law Journal article









Tuesday, 2 January 2018

THE EU MOTOR INSURANCE REQUIREMENT IN A NUTSHELL

 On the scope and nature of the compulsory insurance requirement

The UK is still subject to the primacy of EU law, at least until March 2019.  As the compensatory guarantee for victims of motor vehicle accidents in the UK is still governed by the superior and binding force of EC Directive (2009/103/EC) on motor insurance, it makes sense to begin any assessment of a claimant's legal entitlement to benefit from third party cover with an analysis of its provisions.


When Article 3 of EC Directive (2009/103/EC) on motor insurance is read in the light of the underlying principles that feature in the consistent line of Court of Justice judgments from Bernaldez in 1996 through to Csonka in 2013, Vnuk in 2014 and Fidelidade in 2017 the third party cover required by the Directive is capable of being distilled into the following simple propositions: 

1.         All motor insurance policies are required to provide a holistic guarantee for the assured's civil liability arising out of the insured vehicles' use.  Article 3 requires each member state to ensure that its national law requires such cover for:
a.         Any motor vehicle conforming with the wide definition in article 1 (mechanically propelled vehicle and intended for travel on land)
b.         Any use made of that vehicle that is consistent with the normal function of the vehicle
c.         Anywhere on land
d.         That the third party victim's entitlement to the insurance guarantee extends to:
 (i) liability for defects in the vehicle itself and 
(ii) liability for unauthorised users and 
(iii) liability for other non-contractual use
2.         The user’s duty to insure and the scope of cover that the insurer is required to provide are coextensive.
3.         Member states have no discretion to introduce their own restrictions, exclusions or limitations.
·         Only one exclusion of cover is permitted: this applies to a passenger who voluntarily enters the vehicle knowing that it has been stolen (Article 13 of the Directive).
·         Subject to this single derogation, once issued, the policy must confer on third party victims an irrevocable guarantee of their compensatory entitlement, up to the minimum levels prescribed by Article 9, regardless of any breaches of policy term or misinformation or fraud at the policy's inception

The CJEU ruled in Candolin that any other exclusion of insurer liability, whether contractual or statutory, is void.  As CJEU rulings have direct effect, this principle is capable of being applied as part and parcel of our national law provision.  The CJEU explained the rationale thus:

‘18     In view of the aim of protecting victims, the Court has held that Article 3(1) of the First Directive precludes an insurer from relying on statutory provisions or contractual clauses in order to refuse to compensate third-party victims of an accident caused by the insured vehicle (Ruiz Bernáldez, paragraph 20)
‘20     By way of derogation from that obligation, the second subparagraph of Article 2(1) [NCB note: this is now set out in Article 13 of the Directive] provides that certain persons may be excluded from compensation by the insurer, having regard to the situation they have themselves brought about (persons entering a vehicle which they know to have been stolen) (Ruiz Bernáldez, paragraph 21).
21     However, as it is a provision which establishes a derogation from a general rule, the second subparagraph of Article 2(1) of the Second Directive must be interpreted strictly.’

The rationale in Candolin is just as capable of being applied to the MIB scheme as it is to a contractual or statutory provision regulating compulsory insurance. 

It is a surprising fact that it does not appear to have occurred to any claimant to invoke Candolin to challenge an unlawful exclusion of liability, within a motor insurance policy, the Road Traffic Act or one of the MIB Agreements. If all exclusions and restrictions in liability that are not expressly provided for within the Directive are void, then our national courts would appear to be bound by the horizontal effect of the Court of Justice's ruling in Candolin to excise the unlawful term when construing the policy terms. This issue has been referred to the Court of Justice by Ireland in David Smith v Patrick Meade & anor; FBD Insurance PLC (Case C-122-17) for a preliminary ruling.

It is clear from the CJEU judgments in Churchill and Csonka that the Directive requires the compensatory protection to be provided at an anterior stage, namely within the insurance policy itself.  It follows that the Article 10 compensating body responsible for compensating victims of uninsured and unidentified vehicles (which in the UK is the Motor Insurers’ Bureau) is a’ last resort’; not a catch-all for insufficiently insured vehicles. 


I am working a series of lectures on this important topic that will also explain how best to deploy the three main EU law remedies that enable private individuals to invoke, in a cost effective and proportionate manner, the superior authority of EU law in ordinary civil actions against insurers, the MIB and the Secretary of State for Transport.