The judgment in the case of Damijan Vnuk v Zavarovalcina Triglav C-162/13 (Vnuk) was handed down in September 2014, however personal injury practitioners and insurers alike continue to consider the implications of this important and wide ranging ruling.

I intend to review the impact of this ruling on accidents involving motor vehicles, with particular reference to how claims are dealt with by the Motor Insurers’ Bureau (MIB) under the Uninsured Drivers’ Agreement.

Vnuk – Case Facts

My colleague Ben Pepper has prepared a useful comment on the case.  In brief, Mr Vnuk fell from a ladder and sustained injury when a tractor towing a trailer full of hay reversed and collided with the ladder.  Mr Vnuk sought to claim compensation from the insurer of the tractor.  This case occurred in Slovenia and failed both at first instance and on appeal where it was held that the policy of insurance in place did not cover that particular use of the vehicle.  The Supreme Court however sought a preliminary ruling from the Court of Justice (CJEU) as to the interpretation of the European Motor Insurance Directives which set out the requirement for vehicles to be covered by a policy of insurance.  It is this ruling with regards to the interpretation of the Directives which has had a profound impact in respect of how the law is to be correctly applied.

The Motor Insurance Directive (Council Directive 72/166/EEC of 24 April 1972)

This is the first of six Directives to consolidate the law dealing with the requirement for insurance across the EU.  The Directive sets out the primary legislation which must be applied in domestic states.  Article 3 of the Directive states that:

Each Member State shall, subject to Article 4, 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’.

Article 1 of the Directive defines ‘vehicle’ as:

any motor vehicle intended for travel on land and propelled by mechanical power, but not running on rails, and any trailer, whether or not coupled’.

The Directive was interpreted by the Court in Vnuk to mean that there must be a policy of insurance in place to cover any vehicle, for any use providing that the use is consistent with the normal function of that vehicle.

Road Traffic Act 1988

So what does that mean for practitioners?

The Directive was implemented into domestic law by the Road Traffic Act 1988.  Unfortunately, the case of Vnuk has now highlighted the significant inconsistencies between the EU primary legislative position and that which has been implemented here.  As practitioners know, where the two are inconsistent, EU law will take precedence.

A motor vehicle is defined under the Road Traffic Act as:

‘a mechanically propelled vehicle intended or adapted for use on roads’.

Further, a road is defined as:

‘any highway and any other road to which the public has access, and includes bridges over which a road passes’. 

There are a number of inconsistencies with this interpretation of the Directive:

1. Vehicle

The way in which ‘vehicle’ has been defined under the Road Traffic Act, means that there are a number of vehicles which will be excluded from the requirement to be insured which were intended to be caught by the Directive.

In the case of Vnuk, the Court gave the example of a tractor being used in the courtyard of a farm.  Under the Road Traffic Act, there would be no requirement for this vehicle to be covered by a policy of insurance.

I consider that the Directive was drafted in such a way as to allow Member States to implement this law in a purposive way.  The purpose of this Directive was to liberalise movement within Member States and to protect accident victims.  The Road Traffic Act is sadly lacking in this regard.

2. Place

As above, the Directive simply states that all vehicles normally used within their territory should be insured.  The Road Traffic Act however only requires insurance where the vehicle is used on a public road.  This is plainly inconsistent with the Directive and narrows the protection afforded to the individual considerably.

3. Use

The Directive requires a vehicle to be insured for any use, providing it is consistent with the normal function of that vehicle.

The Directive is clear; insurance should be in place in all circumstances for all uses.  Unfortunately, the Road Traffic Act allows insurers to prescribe those circumstances in which it will be entitled to avoid the policy, save where it is expressly prevented from doing so under the Act.  Insurers will often try to use the terms of their policies to avoid liability and refer the claim on to the MIB Uninsured Drivers’ Agreement (see below).

However, in the conjoined cases of Churchill Insurance Co Ltd v Fitzgerald and Evans v Cockayne [2012] EWCA Civ 1166 it was held correctly that s151 (8) of the Road Traffic Act did not comply with the Directive.  This related to the fact that an insured passenger would be automatically denied compensation where he allowed an uninsured person to drive the vehicle.  The Court held that this was inconsistent with the purpose of the Directives and that the addition of notional wording was required to interpret the Road Traffic Act so that it was compliant with EU law.  Further, it is clear under the Directive that the only valid exclusion would be where the individual knew the vehicle to be stolen.   This is in-keeping with the principle of ‘ex turpi causa’, which must be correct.

MIB Drivers’ Agreements

The Directives require each Member State to make provision to compensate those victims of accidents caused by uninsured or untraced drivers.  The MIB was therefore created in order to meet the requirement of the Directives and the way in which compensation may be payable is governed by the Untraced Drivers’ Agreement and the Uninsured Drivers’ Agreement respectively.  As above however, the Drivers’ Agreements have implemented the Directive incorrectly.

I have previously written about the Untraced Drivers’ Agreement in myblog, and so I will only deal with the Uninsured Drivers’ Agreement here.

Uninsured Drivers’ Agreement England, Scotland and Wales 1999 (the Agreement)

The Directives set out that a claim should be referred to the MIB (or equivalent body) only where:

  1. there is no policy of insurance in place; or
  2. the claimant knew that the vehicle was stolen.

In all other circumstances, the claim should be dealt with by the insurer of the vehicle as normal.  Any attempt by the insurer therefore to attempt to avoid liability entirely or downgrade their liability to an Article 75 insurer and indeed then rely on the Agreement has no basis in EU law and should be strongly resisted.

Problems with the Agreement

1. The Road Traffic Act 1988

This Agreement has been drafted to comply with the Road Traffic Act, rather than the Directives.  The MIB will only step in where a vehicle is required to be insured under the Road Traffic Act, but is not.  The MIB will not therefore deal with a claim where the Act does not require the individual to be insured in the first place.  For example, where an accident takes place on private property or where a vehicle not intended or adapted for road use is used.

This obviously places the individual at a disadvantage, as they cannot pursue a claim against the insurer of the vehicle nor can they claim from the body set up to compensate victims of uninsured drivers.

The purpose of the Directive was to ensure that any victim of an accident involving a motor vehicle would not be prevented from recovering compensation, simply because there was not a valid policy of insurance in place.  Unfortunately, there is a gap between the Road Traffic Act and the Agreement, which would allow just that.

2. Exceptions

There are a number of exclusions under the Agreement where an individual will be prevented from recovering compensation.  These are set out at clause six of the Agreement and most notably include where an individual willingly travels in a vehicle which they know or ought to know is stolen or which they know or ought to know is uninsured.

This goes significantly further than the Directive and would prevent individuals intended to be protected by the Directive from recovering compensation for their injuries.  The Directives do not prevent an individual from recovering compensation where they know the driver to be uninsured.  Further, in respect of a stolen vehicle, the Directives state that the person should ‘know’ that the vehicle is stolen.  The Agreement (and indeed the Road Traffic Act) adds an objective element to the test in the form of ‘ought to know’.  The burden of proof is on the MIB/insurer and so it is significantly easier under domestic law to avoid paying compensation than it would be under the Directives.  This cannot be right and cannot be what was intended when the Directives were initially enacted.

Conclusion

The case of Vnuk has highlighted that the Motor Insurance Directives have been implemented incorrectly into our domestic law, such that victims of accidents who are rightly entitled to compensation are being denied justice.  Insurers as well as the Motor Insurers’ Bureau are taking advantage of this lapse in the law to avoid paying damages to those who are entitled to bring a claim.  I consider this to be completely unacceptable and that reform is needed immediately in order to rectify this issue.

For the moment, our only option until there is reform is to request that the Courts interpret our domestic law in a way which is consistent with the Directives, claim direct effect in cases involving the MIB or other public bodies or to bring a Francovich claim against the Secretary of State for damages.  Each of these options make it more difficult for the innocent victim to recover damages following an accident that was not their fault, when the injured person is already at a disadvantage by reason of having had the accident in the first place.