The inconvenient truth is that the UK’s national law provision for compulsory third party motor insurance is unfit for purpose. Unfortunately neither the Minister for Transport nor the judiciary seem to be prepared or able to tackle the extensive injustices caused by decades of bungled legislation and ministerial incompetance.
Drawing a line on reform
My five-year campaign to persuade the government to
initiate legislative reform to bring the compensatory guarantee for third party
victims provided by motor insurance into line with the minimum standard
required under EU law will probably never be fully realised. This is principally due to the intervention
of Brexit, as this campaign was based on drawing a comparison with European law.
Even so, the campaign has been partially successful. In July 2015 and again in March 2017 the
Minister for Transport removed many unlawful and arbitrary provisions from the
Motor Insurers’ Bureau’s twin schemes for compensating victims of uninsured and
untraced drivers. [See footnote 1]
The Motor Insurance Bureau (MIB) is a consortium owned and
operated by every authorised motor insurer in the UK. It has conflicted interests: as it is both an
agency and representative body of the insurance industry whilst at the same
time discharging an important public service role devolved on it by the Department
for Transport that requires it to funding and operate both compensation schemes. Between them, these reforms have stripped the
MIB of many of its unjust and arbitrary powers and represents the most
significant MIB reform for decades.
Most of the reforms to the MIB agreements were exacted in
the teeth of opposition from the motor insurance industry and the government and
most were only conceded in response to RoadPeace’s long running juridical
review. [see footnote 2]
RoadPeace’s judicial review was the first time that the UK’s
entire national law provision in this area was subjected to close
scrutiny. This exposed the government’s
longstanding and systemic failure to bring the compensatory protection for
motor accident victims into line with the unqualified and more generous scope
mandated under European law.
Reform in this area was obstructed over several decades by
the combined weight of a highly influential motor insurance industry and a series
of ineffectual ministers in the Department for Transport. The unnecessarily complex and arbitrary nature
of the UK statutory and ex-statutory provision in this area has provided
insurers with fertile ground in which to cynically exploit loopholes on legal
defects in the legislation: thereby frustrating the Parliamentary objective of
ensuring that accident victims are fully compensated.
Self help
Fortunately, individuals unjustly denied their compensatory
guarantee are able to invoke this EU law, in their own right, in ordinary civil
actions; at least whist the primacy of EU law prevails.
The primacy of EU law and the EU law remedies for those
affected by the UK’s blatant and long-standing breaches of EU law prevail, at
least until March 2019 and possibly beyond that in some different form. The problem here being that many professional
advisors and member of the judiciary are not comfortable with tackling the
comparative law issues these challenges involve. [see footnote 3]
Institutional indifference
The long overdue reforms to both MIB compensation schemes were
won in the face of trenchant opposition.
They were only made possible by first exposing the UK’s defective
implementation of the EC Directive (2009/103/EC) on motor insurance (which
imposes a higher standard of compensatory protection) and then by invoking the
primacy of European law principle against the state. RoadPeace’s judicial review (considered below
and in previous blogs) brought this widespread institutionalised illegality to
light.
Unfortunately, the judicial review has only been partially successful. Whilst major statutory infringements have also
been identified, the court refused to order the government to remove this
illegality. The judge contented himself
with making a number of declarations of non-conformity. He seemed to find nothing amiss in either of
the MIB agreements, notwithstanding the extensive reforms initiated in response
to the judicial review and the rank injustice of some of their provisions. [See footnote
4] Nowwhere in the lengthy judgment
is Brexit mentioned but its effect is pervasive.
The outcome of this judicial review was highjacked by
political events: Brexit supervened. The
judiciary are understandably reluctant to force the executive to introduce major
statutory reform to bring the UK implementation of EU law into line, on the
brink of the UK’s departure from the EU.
Reflections on the judicial review
The aim of this blog is to explain what happened in the
RoadPeace judicial review, whose inception predated the Brexit referendum, and
which forced the government to reform its extra-statutory provision in the form
of the MIB agreements.
In a later blog I will outline the EU law (self-help) remedies
available to victims affected by the UK’s infringement of EU law. These do not depend on the government’s
caprice. I refer to the following
remedies that private individual can invoke in ordinary civil actions:
- the doctrine of EU law consistent construction of UK law (to bring the defective UK law into line with the EU law it is supposed to implement) applying the principles developed in the Marleasing and Pfeiffer rulings;
- the direct vertical and potentially horizontal effect of some of the Directive’s provisions against certain institutions (that allow individuals to rely on the wording of a directive in an action as though it they were enacted in UK legislation) and,
- as a last resort only, an action for damages against the government for its failure to implement a directive under Francovich principles.
The point here being that although the timing of the public
law action by RoadPeace was too late to compel the government to introduce legislation
to bring its laws into line with EU law on the eve of Brexit, other cogent
private law remedies are available.
RoadPeace v Secretary of State for Transport [2017] EWHC 2725 (Admin)
In October 2015 RoadPeace, a road accident victim support
charity, applied to judicially review the Secretary of State for Transport’s
decision to ignore its calls for the removal of two unlawful exclusions of
liability from the two extra statutory compensation schemes for victims of
uninsured and unidentified motor vehicles.
The exclusion clauses were not permitted under European law.
Legal action was made necessary because the minister and the
Motor Insurers Bureau (MIB) both refused, publicly and point-blank, to excise
this illegality.
The remit of RoadPeace’s judicial review was expanded to
embrace the systemic non-conformity that riddles the UK’s implementation of EC
Directive (2009/103/EC) on Motor Insurance (the Directive); the latter of which
being more comprehensive in the scope and extent of the protection conferred on
victims. Here again, the minister had
been warned of this extensive illegality not just by RoadPeace but also by
several other well informed representative bodies - and in response to the
minister’s own consultation on the MIB of February 2013. Notwithstanding this, the minister refused
even to discuss the need for reform, exposing the consultation for the empty
sham it was.
RoadPeace’s motivation
RoadPeace’s decision to challenge the combined weight of the
state and the influential motor insurance industry was a courageous one. RoadPeace is a small charity with modest
resources. It was established in 1992
out of concern for the plight of road crash victims and the inadequacy of the
national law provision and support to help them rehabilitate. It provides emotional support and advocacy
for road accident victims and it aims to help them navigate the justice
system. Civil compensation is essential
if innocent victims are to recover.
RoadPeace’s primary concern was that the national law
provision had grown so complex that it was highly unlikely that a reasonably
intelligent and well-informed individual would be able to ascertain their
proper legal entitlement from the extensive statutory provisions,
extra-statutory schemes and seemingly contradictory case law.
Conflicting outcomes in cases such as the House of Lords
ruling in Gardner v Moore and others [1984]
1 All ER 1100 and EUI v Bristol Alliance Limited Partnership [2012] EWCA
Civ 1267showed that even the senior appellate courts could not adopt a
consistent approach to interpreting these provisions; what hope then for an
ordinary private individual?
This highly unsatisfactory state of affairs conflicts both
with our common law rule of law principle as well as the Directive that it is
supposed to fully implement.
Parliament’s legislative aim subverted
The obligation to take out third party motor cover was first
imposed by section 35 of the Road Traffic Act 1930. This wording survives in its amended form in
section 134 Road Traffic Act 1988. In
the words of Gloster LJ in Cameron v Hussain [2017] EWCA Civ 366:
- ‘[41] I start my analysis the basic proposition that the policy of the regime imposed by Part VI of the 1988 Act makes clear that, where a policy of insurance is in place in respect of a vehicle, the insurer must, where it has received statutory notice (under section 152 of the 1988 Act) of the issue of third party proceedings, generally meet liabilities to a third party victim irrespective of whether the policy covers the driver/tortfeasor, and irrespective of the identity of the tortfeasor.
- [42]. That policy is wholly consistent with common sense. If an insurer agrees to effect an insurance policy in respect of a specific vehicle and receives a premium in respect of accept-ing that risk, then prima facie, at least, and subject to any right to avoid the policy, the insurer, having received the economic benefit, should bear the economic risk as to the following matters: the existence or non-existence of the insured or named drivers; the fact that such persons may allow uninsured persons to drive the vehicle; and the fact that, because the vehicle is on the road, it may be driven unlawfully by persons without the consent of the insured.’
This protective purpose is borne out by the measures
Parliament took in 1934. When it first
imposed this insurance obligation on road users in 1930, it did not initially
concern itself by prescribing the scope or extent of that cover. It appears to have assumed that motor insurers
could be trusted to act in good faith and issue suitable policies. It very soon became apparent that the
insurance industry could not be trusted to deliver Parliament’s social policy
objective of guaranteeing the compensatory entitlement of motor accident
victims. They routinely issued policies that
were hedged with so many caveats, restrictions and exclusions as to make them
worthless in numerous instances. As this
undermined the legislative aim and so it was necessary to legislate again, in
1934, to curb the ability of insurers to evade their liability to compensate
accident victims.
Unfortunately, the 1934 reform was bungled. Instead of imposing a general prohibition on a
motor insurer’s ability to invoke any contractual provision as a defence
against to a valid third party claim, the prohibition was restricted to a
number of specific instances (now set out in section 148 Road Traffic Act
1988).
Motor insurers have continued to exploit the loopholes this
provided by citing numerous alternative contractual restrictions and exclusions
that allow them to shirk their moral responsibility to honour the spirit of this
profitable oligopolistic market for compulsory third party cover that a state
enforced scheme confers.
A long line of ministers have apparently been deceived into
believing that the loopholes and anomalies that infest this shambolic regime
(and thus undermine the legislative purpose of 1988 Act) are somehow necessary
to protect the legitimate business interests of motor insurers. French insurers manage well enough, charging
comparable premiums for an equivalent degree of coverage and yet they are
unable to invoke restrictions in cover against a genuine third-party claimant.
Concessions made within the judicial review
RoadPeace’s pre action protocol letter listed over eighty
potential infringements of the Directive spanning the UK national law
implementation of the Directive. These
were inevitably confined to a handful of grounds within the action.
Such was the strength of RoadPeace’s case that the minister was
forced to concede a number of grounds.
For example:
- In December 2016 he publicly admitted that the geographic scope of the insurance requirement and the definition of motor vehicle were both too narrowly defined in the Road Traffic Act 1988 (as well as in both MIB compensation schemes that relied on the statutory definitions for their own scope) so that they failed to comply with the Directive. Another consultation exercise was initiated by the minsiter, ostensibly into the options for implementing the European Court of Justice’s ruling in Damijan Vnuk (Case C-162/13). It should be noted that this illegality had been spelt out to the minister in April 2013 by myself and supported by RoadPeace and a number of other representative bodies back in April 2013 (over three years before) and again following the Vnuk ruling in September 2014 (over two years before) but in both cases nothing was done.
- In January 2017, the minister announced extensive reforms to the MIB compensation schemes. These included the removal of the two illegal clauses in both schemes that RoadPeace had warned him about in July 2015 and prior to bringing the judicial review, as well as a number of curbs on the MIB’s arbitrary powers under the Untraced Drivers Agreement 2003
By the time the judicial review was heard by Mr Justice
Ouseley in mid-February 2017, the challenge was confined a handful of
grounds. The learned judge reserved
judgment, observing that the judicial review raised important issues and that
doing nothing was not an option.
Status Quo defended
On 7 November the
learned judge delivered his long delayed judgment in RoadPeace v Secretary of
State for Transport [2017] EWHC 2725 (Admin).
The judgment identifies the following infringements of the
Directive:
- Sections 145 and 192 of the Road Traffic Act 1988 wrongly restrict mandatory third-party motor cover to vehicle use in public spaces
- Sections 145 and 182 of the Road Traffic Act 1988 wrongly restrict the types of vehicles subject to the compulsory insurance to road vehicles
- Section 152(2) of the Road Traffic Act 1988 wrongly permits an insurer to invoke a misrepresentation or non-disclosure to avoid its statutory liability to compensate a third party
- Regulation 2 of the Rights Against Insurers Regulations 2002 wrongly limits the direct right of action against motor insurers to UK accidents
The first three findings had been conceded prior to the
hearing. Unfortunately, the judge
declined to attempt a Marleasing / Pfeiffer style EU law consistent
construction of these statutory provisions, which could have been achieved readily
as the EU law is crystal clear and simple on these points. All that was required was the excision of the
unlawful restrictions in the scope of the compulsory third party motor
insurance requirement - by deleting the offending words: such as ‘road or other
public place’.
When, on 13 December 2017, the learned judge finally came to
deliver his official declaration of non-conformity he excluded any reference to
section 152(2) Road Traffic Act 1988 despite the non-conformity having been conceded
by the minister (following the Court of Justice’s recent ruling on a similar Portuguese
provision in Fidelidade (Case C-287/16)).
Although section 152(2) Road Traffic Act 1988 cited initially as one of
the eighty potential infringements, that ground was not pursued in the judicial
review.
The judge refused RoadPeace’s request that he impose a
strict time-limit for compliance on the state, notwithstanding its long track
record of obfuscation and delay.
The 7 November judgment dismisses the remaining grounds,
chief of which was the complaint that the Road Traffic Act 1988 wrongly permits
insurers to invoke contractual restrictions in and exclusions of liability
against third party victims. This ground
was founded on clear and unequivocal rulings by the Court of Justice that hold that
such practices are prohibited: because they are inimitable to the protective
purpose mandated by the Directive. This requires
an autonomous compensatory guarantee to be provided within the insurance policy.
[See footnote 4]
Muddled reasoning
The learned judge’s reasoning for dismissing the claimant’s
challenge that disputed the well-established perception that the UK retains a legislative
discretion to permit insurers to water down the cover provided under this
scheme, seems particularly perverse.
Mr Justice Ouseley acknowledged that the Court of Justice
had decreed, in Bernaldez [1996] Case C-129/94, that the UK had no discretion
to permit exclusions of liability, save where expressly permitted by the
Directive itself. The judgment even
cites this key passage from that ruling:
- ‘20. Article 3(1) of the First Directive [which first imposed the motor insurance requirement] precludes a company insuring against civil liability in respect of the use motor vehicles from relying on statutory provisions or contractual clauses in order to refuse to compensate those victims for an accident caused by the insured vehicle.’ [words in parenthesis added]
- It will readily be perceived that this prohibition applies not only to contractual provisions, such as social and domestic use restrictions and unauthorised use exclusions but also to statutory exclusions of liability, such as is found in section 151(4) Road Traffic Act where a passenger knew or ought to have known the vehicle they were riding in had been unlawfully taken.'
- ‘It would be remarkable if, without spelling it out in so many words, the [Court of Justice] had decided as far back as Bernaldez, the language of which, in its usual way, it repeats in subsequent cases, that any use which could be made of a motor vehicle required compulsory insurance.’ [words in parenthesis added]
But that is precisely what the Court of Justice did say in
Bernaldez in 1999 and repeatedly thereafter.
It is hard to see how paragraph 20 in Bernaldez could possibly bear the
restricted interpretation the learned judge gave it.
The judge’s remarks also ignore the fact that Recital 15 of
the Directive confirms the Court of Justice’s interpretation by stipulating
that contractual disputes should be confined between the contracting
parties. They also miss a very obvious
point: that the by repeating this
statement of principle in every judgment on this point, the Court of Justice clearly
intends it to be applied uniformly as a point of principle of general
application. This view (that the
prohibition is intended to be a rule of general application, is also confirmed
by the way the court circumscribed the role of the MIB (in its role as
compensator of victims of uninsured vehicles under Article 10 of the Directive)
where it is described as a ‘last resort’ reserved for incidents where the
vehicle responsible has no policy at all or is unidentified. See Conska (Case C
– 409/11) which is explicit on this point.
The autonomous nature of the insurance requirement and the
MIB’s restricted role are two sides of the same coin.
Appeal
RoadPeace have applied for leave to appeal the judge’s
finding on the legislative discretion point.
It has also sought this important EU law issue to be referred to the
Court of Justice for a preliminary ruling.
Whether it has the funds to pursue such an appeal remains to be seen.
Where does this leave us?
The learned judge’s refusal to order the government to
remedy the longstanding illegality in our national law provision and his
rejection of an important ground (relating to the UK’s legislative discretion) dooms
thousands of motor accident victims and millions of consumers to further legal
uncertainty and in particular it denies accident victims the autonomous compensatory
guarantee through motor insurance mandated under European law. This amounts an appeasement of
institutionalised illegality. Brexit and
the obvious unwillingness of the government to stand up to the insurance
industry are clearly factors here.
However, for as long as the UK remains a full member of the
European Union and possibly also during a transitionary period, the treaty bound
principle of primacy of EU law prevails.
This means that three EU law remedies will continue to apply during this
period to all causes of action occurring within this period.
The European law standard
The European law is simple and clear and consistently
applied. It requires the insurance
obligation set out in Article 3 of the Directive that the third party cover
should be fit for purpose to be fully effective.
The scope of third party cover must extend to any use of the
motor vehicle on land, regardless of whether it is on a road or off; regardless
of whether it is on private property or not.
The basic rule on the extent and quality of contractual
cover provided under Article 3 is that once a policy has been issued, it should
be good to meet any third party claim up to the minimum amounts specified by Article
9 of the Directive.
The autonomous nature of this compensatory guarantee is prescribed
as an absolute requirement, in its application to third party claimants. The guarantee is not one that can be whittled
away by contractual or statutory provisions.
This third-party guarantee is without prejudice to any
contractual rights that the insurer may have against its assured. However, the Court of Justice ruled in
Churchill (Case C-442/10) in 2011 that the Directive’s protective purpose is so
important that in the rare instance where the assured is also an injured
passenger, the insurer’s contractual rights should be subordinated to the
legislative protective aim. The
claimants status as victim overrides that of contracting party. According in such circumstances, the assured
entitlement as victim is not to be excluded automatically and only in exception
circumstances and to a degree that is propitiate to the assured’s
responsibility for their own harm.
There is only one contractual exclusion permitted against a
third party, this applies to a passenger whom the insurer can prove was foolish
enough to get into the vehicle in which he or she is injured, knowing that it
has been stolen. This is expressly set
out in Article 13 of the Directive.
The qualified and contingent nature of third party cover
permitted under UK law is clearly inimical, at a fundamental level,
with the absolute and autonomous guarantee mandated by the Directive.
Justice tempered by convenience
It is clear that several recent UK judgments, including EUI
v Bristol Alliance in 2012, Delany v Secretary of State for Transport and the
MIB in 2014 as well as Sahin v Havard and the RoadPeace judgments in 2017 are
all based on the long-held assumption that the UK retains the necessary
legislative discretion to lumber its citizenry with this second-rate level of
third party cover. It doesn’t, for the
reasons explained above and elsewhere in more detail.
One is tempted to infer that the courts are reluctant to cause
disruption to the government’s legislative programme by requiring it to
implement the root and branch overhaul of its idiosyncratic and often anomalous
provision in this years. It is necessary
for domestic and EU Treaty purposes. This is because the law on third party motor
cover is the confusing product of over eight decades of piecemeal legislative
and executive provision: provision that often reflects political compromises
made by ministers that undermine the original Parliamentary aim (one that is on
all fours with the European law protective purpose).
However, the rule of law should not expose citizens to
unclear, unjust and often unintelligible laws whose very complication baffles
learned jurists and enables a powerful corporations to play the system at the
expense of private individuals at their most vulnerable. The rule of law requires an individual’s
legal entitlements and duties to be set out in clear and easily assessible
form. It should not be qualified by the
administrative convenience and conceit of an insouciant executive or by a
judicial reluctance not to rock the boat on Brexit.
EU law remedies
The focus of my legal training on motor insurance in 2018
will be to explain how easy it is to undertake a comparative law analysis of
the UK’s statutory and extra-statutory implementation of the EU law governing
this area and to explain and demonstrate how to set about invoking the three EU
law remedies.
Whilst the UK is subject to the primacy of EU law, motor
accident victims will able to enforce their proper legal entitlement, provided
they receive competent legal advice.
Thereafter, there it seems likely that these rights will be subordinated
to the commercial interests of the motor insurance lobby and the caprice of
ineffective ministers and civil servants.
Footnotes
1. Link to my blog on the UDA 2015. http://nicholasbevan.blogspot.co.uk/2015/07/the-uninsured-drivers-agreement-2015.html;
link to my lecture slides on the UDA
2015 https://drive.google.com/file/d/1X9Df9kpU59WTYdks9BWKXS81rRH8ni0-/view?usp=sharing
2. Link to my blog on the UtDA 2017 https://nicholasbevan.blogspot.co.uk/2018/01/the-untraced-drivers-agreement-2017.html
Link to my lecture slides on the UtDA 2017 https://drive.google.com/file/d/1k25sPbWDlYMA9WcixB3wx3coJbNeEeYQ/view?usp=sharing
3. Link to UK and EU
motor cover compared https://nicholasbevan.blogspot.co.uk/2017/10/uk-and-eu-motor-cover-compared.html
4. Link to my analysis of the RoadPeace judgment https://www.blogger.com/blogger.g?blogID=2649783362311988948#editor/target=post;postID=6438014282184345353;onPublishedMenu=allposts;onClosedMenu=allposts;postNum=2;src=postname
4. Link to my blog and NLJ article: Defending the
Indefensible https://nicholasbevan.blogspot.co.uk/2017/12/defending-indefensible.html
For a timeline of the Department for Transport's inaction: see Action Not Words from 2016. Since when the DfT issued its consultation on implementing the Court of Justice's ruling in Vnuk from September 2014 (which the DfT published in December 2016) but no further action has been taken.
Ministerial obfuscation
For a timeline of the Department for Transport's inaction: see Action Not Words from 2016. Since when the DfT issued its consultation on implementing the Court of Justice's ruling in Vnuk from September 2014 (which the DfT published in December 2016) but no further action has been taken.
