Pump Court Chambers

European influence on UK Insurance industry loosens

News 30th September 2022
Antonia Ford

Insurance has been part of road traffic litigation since 1897 when the first policy was issued. Policies were based on existing insurance schemes covering horse drawn carriages and third-party cover was not commonplace. Modern compulsory insurance was not introduced until the Road Traffic Act 1930, a significant time after Ford, Renault, Fiat, Daimler and Benz started commercially producing cars.

This slow evolution has resulted in significant differences between insurance systems in the UK and in many other European countries. Whilst both systems are intended to ensure that a person injured by a negligent driver will receive compensation, they take fundamentally different approaches. European vehicle insurance generally covers any driver in any circumstance, whilst UK policies insure specific individuals to drive a specific car for specific purposes

This difference in methodology has caused tension between UK and European based law on many occasions not least with the 2014 judgment of Vnuk v Zavarovalnica Triglav (Case C-162/13) (Vnuk).

The Claimant, a Slovenian farm worker was knocked off his ladder by a tractor trailer whilst it reversed across the farmyard. At first instance the Slovenian court ruled against Mr Vnuk on the basis that the insurance covered vehicles being used as modes of transport only. The claim was referred to the Court of Justice for the European Union (the ECJ).

The claim turned on the interpretation of Article 3 (1) of the First Directive Council Directive 72/166/EEC dated 24th April 1972 which requires member States:

 ‘to take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance.

In finding for the Claimant, the ECJ determined that the duty to insure extended to these accident circumstances and that ‘use of vehicles’ must be interpreted to cover ‘any use of a vehicle that is consistent with the normal function of that vehicle’.

This interpretation had wide-reaching implications to the UK insurance system where the concept of ‘use’ is an essential element in indemnity and coverage. The Judgment forced, for example, the extension of coverage:

  1. beyond the public highway (Lewis v Tindale [2019] 1 WLR 6298);
  2. to a Claimant who knowingly travelled in a stolen vehicle (Greenaway & another v Parrish & Others [2021] 4 WLR 97);
  3. to a vehicle under repair in a garage (UK Insurance Ltd V Holden & another [2019] 3 All ER 917.

Concerns were also raised that the Judgment could impact motor sports, agriculture and the Statutory Off-Road Notification scheme (SORN).  It also had the potential to disproportionately effect the Motor Insurance Bureau.

It was estimated by the Government Actuary department that implementing Vnuk could cost the insurance industry approximately £2 billion with a significant proportion of those costs being passed to consumers.

In order to limit the influence of Europe on the UK insurance market Peter Bone (Conservative MP for Wellingborough)introduced a private members bill in June 2021. The resulting Act (the Motor Vehicles (Compulsory Insurance) Act 2022) gained royal assent on 28 April 2022 and came into force on 29 June 2022. This Act expressly limits liability in respect to ‘use’ under article 3, such that compulsory cover is no longer to be interpreted to include vehicles other than motor vehicles and use otherwise than on a road or public place. This amendment restores the equilibrium upset by Vnuk and returns a small degree of certainty to the already complicated subject of indemnity.

But don’t relax too much! Whilst ‘a road’ is defined by s 192 of the Road Traffic Act 1988, a ‘Public Place’ is not. A number of inconsistent cases considering the definition of ‘use’, ‘road’ and ‘public place’ show that indemnity will remain a contentious issue even without ongoing influence from Europe.

This article ‘European influence on UK Insurance industry loosens’ was written by Antonia Ford, for further information on her practice please contact one of our clerks on 020 7353 0711 or via email: clerks@pumpcourtchambers.com

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