AN INCONVENIENT TRUTH

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:

1. 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;
2. 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,
3. 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.'

The learned judge’s response was to opine:

• ‘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

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.