Churchill Insurance Co. Ltd v Wilkinson; Evans v Equity Claims Limited [2010] EWCA Civ 556 [Lord Neuberger MR Waller LJ, WALL LJ] 9/05/2010; Court of Justice of European Union 1/12/2011

Section 151(8) Road Traffic Act 1988 does not constitute exclusion from compulsory insurance cover.  In cases where insured victim gave permission to another to drive the vehicle (whether or not insured had knowledge that driver uninsured), European Court interprets EU Directive as precluding national rules whose effect is to omit automatically the requirement that the insurer should compensate insured victim who is passenger in that vehicle.

The Court of Appeal referred to the European Court the issue of whether an insurer’s right of recovery under section 151(8) of the Road Traffic Act (1988) (“the Act”) was compatible with European Community Law.

In both cases, the injured claimants were travelling as passengers in or on vehicles that they were insured to drive but the negligent driver of each of the vehicles was driving with their permission but was uninsured.  In one case that permission was given with knowledge that the driver was uninsured; in the other, the permission was given without giving any thought to that question.

In Wilkinson’s case, the Claimant’s parents had bought him a car and insured it through Churchill.  His mother was the policyholder but he was a named driver.  After driving his friends to a McDonalds to get something to eat, the Claimant permitted his friend, Fitzgerald (who had been drinking) to drive the car.  The Claimant knew that Fitzgerald was not insured to drive the car.    Fitzgerald lost control of the car and the Claimant sustained injuries when it collided with a vehicle coming in the opposite direction.

In the case of Evans, the Claimant had a motorcycle that she insured with Equity under a policy that permitted her to drive the motorcycle but nobody else.  On the day of the accident, she permitted her friend Cockayne to drive the motorcycle on which she travelled as pillion passenger.  Cockayne had been insured under a policy of insurance to drive his own motorcycle but no other and was therefore uninsured.  The Claimant had given no thought to the question of whether he was insured to drive her motorcycle.

Where a person insured to drive a car is a passenger in the car which he has permitted to be driven by a non-insured driver, and is injured through the negligence of the driver, the insurer is bound to compensate the passenger by virtue of section 151(2) of the Act. The question for the Court of Appeal was whether in the light of certain provisions of Community law the insurers are entitled to reclaim that compensation from the passenger as the insured under s 151(8) of the Act and/or by virtue of the terms of the policy.

Section 151(8) of the Act provides

“Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is not insured by a policy …., he is entitled to recover the amount from that person or from any person who

  1. is insured by the policy, …., by the terms of which the liability would be covered if the policy insured all persons …. and
  2. caused or permitted the use of the vehicle which gave rise to the liability.”

That question was answered at first instance in favour of the insurers in the case of Evans and denied her compensation from Equity.  Although Evans was successful, the trial judge found that she had to repay her compensation to her insurer under section 151(8) as she had caused or permitted the tortfeasor to drive. The question was answered against the insurers Churchill at first instance in the case of Wilkinson and gave judgment in favour of Benjamin Wilkinson.

The judge in Wilkinson’s case viewed section 151(8) as an exclusionary provision which was prohibited by EC law: it was unreal to draw a distinction between a clause which prevented recovery, and a clause which allowed recovery but removed it a nanosecond later. It was possible to construe section 151(8) as not extending to a person who was entitled to the benefit of a judgment under section 151. The correct approach was to allow Wilkinson to enforce any judgment in his favour, free of section 151(8).

In these conjoined appeals the question was which of those judges was right.

The Court of Appeal referred two questions to the European Court of Justice which were, in essence, whether Articles 12(1) and 13(1) of Directive 2009/103 (codifying earlier Directives on the issues which were in force at the relevant time) are to be interpreted as precluding national rules whose effect is to exclude from the benefit of insurance a victim of a road traffic accident when that accident was caused by an uninsured driver and when the victim, a passenger in the vehicle at the time of the accident, was insured to drive the vehicle himself and had given permission to the uninsured driver to drive it.

Secondly, the Court of Appeal sought a ruling on whether the answer to the first question above would be different depending on whether the insured victim was aware that the person to whom he gave permission to drive the vehicle was not insured to do so, whether he believed that the driver was insured or whether or not he had turned his mind to that issue.

The European Court of Justice held that, in relation to the first question, the relevant Directives (now codified in Directive 2009/103) must be interpreted as precluding national rules whose effect is to omit automatically the requirement that the insurer should compensate a passenger who is the victim of a road accident when the accident was caused by a driver not insured under the insurance policy and the victim, who was a passenger in the vehicle at the time of accident, was insured to drive the vehicle himself and had given permission to the driver to drive it. Section 151(8) would not constitute an exclusion from compulsory insurance cover.

In relation to the second question, the fact that the insured victim was aware that the person to whom he gave permission to drive the vehicle was not insured to do so, or that he believed the driver was insured, or whether or not he had turned his mind to that issue had no bearing on the answer to the first question.

A further blow for insurers.