Three recent decisions have explored the extent to which motor insurers will be held liable to satisfy judgments under the statutory provisions of the Road Traffic Act 1988. As ever the court’s interpretation of those provisions can create as much uncertainty as it does clarity, and never more so than in the case of Churchill Insurance Company v Fitzgerald & Wilkinson and Ors.3

Section 151 of the 1988 Act requires insurers to satisfy judgments in favour of injured passengers regardless of whether there would be grounds to refuse indemnity as a matter of ordinary insurance law. It sometimes happens, however, that the injured person seeking damages and the person insured under the contract are one and the same, usually when the insured was travelling as a passenger in his own car. In such cases, where the negligent driver was not covered by the policy of insurance and was driving with the permission of the insured, section 151(8) permitted the insurer to recover from the insured any sums which section 151 would make the insurer liable to pay. Where the injured person was also the insured, this in effect nullified the insurer’s obligation to satisfy the judgment. Section 151(8) reads as follows:

“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 or whose liability is not covered by a security, he is entitled to recover the amount from that person or from any person who:

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

The question arose as to whether this provision is inconsistent with European motor insurance law. When the Court of Appeal initially considered this matter, i.e. before any ruling from the Court of Justice of the European Union (“CJEU”), Waller LJ had suggested that “the effect of section 151(8) as a matter of English law must be to exclude from the benefit of insurance a passenger who is the insured but has given permission to an uninsured driver to drive.” However, the Court of Appeal decided to ask for a preliminary ruling from the CJEU on the effect of the various European Motor Insurance Directives and whether such a reading of section 151(8) was compatible with European law.

The principal ruling was, in short, that the Motor Insurance Directives4 preclude national rules whose effect is to “omit automatically” the requirement that the insurer should compensate a passenger who is a victim of a road traffic accident.

The matter then came back before the Court of Appeal, and all parties, including the Secretary of State for Transport who had intervened, agreed that section 151(8) could be interpreted to be compatible with the Directives, and it was then for the Court of Appeal to decide what words should be read into section 151(8) to ensure its compatability. The claimants argued that there should be no right of recovery at all against insured passengers who were also victims. The Court of Appeal preferred, however, the interpretation and wording suggested by the insurers and the Secretary of State for Transport, which added the emboldened words to sub-paragraph (b) of section 151(8) as follows:

“(b) caused or permitted the use of the vehicle which gave rise to the liability, save that where the person insured by the policy may be entitled to the benefit of any judgment to which this section refers, any recovery by the insurer in respect of that judgment must be proportionate and determined on the basis of the circumstances of the case.

The questions which will inevitably arise for both claimants and insurers are in what circumstances, and to what extent, will any recovery from the injured passenger be held to be proportionate. Such a recovery will plainly be distinct from, for example, the contributory negligence of a passenger who encourages excess speed or who knowingly allows himself to be conveyed by a drunk driver. Will it be proportionate for the insurer to recover only in the situation in which the passenger has permitted the driver to use the vehicle in the explicit knowledge that he is not insured to do so, or will the owner of a vehicle always be expected to make reasonable enquiries into the insurance of another who offers or asks to drive his vehicle? And what are reasonable enquiries, and will there be a sliding scale of what is proportionate dependent on the extent of those enquiries? These are all questions with which we all now will have to wrestle, and the effect of paragraph 49 of the CJEU ruling may end up being crucial: “it is only in exceptional circumstances that the amount of compensation may be limited on the basis of an assessment of that particular case”.

It should be noted that permission to appeal is being sought by the claimants from the Supreme Court.

Another very different case involving section 151 was that of AXN & Ors v Worboys & Inceptum Insurance Company Ltd.5 Worboys, a taxi driver, had targeted women who were alone at night, and had offered them lifts to their homes. Once they had accepted his offer, he gave them alcoholic drinks which he had laced with sedatives and subjected them to sexual assaults. The issue with which the court was concerned was whether the claimants who had been the victims of these assaults had valid claims against the section 151 insurer of Worboys’ taxi.

There were four requirements which needed to be satisfied for the insurer to be liable to satisfy a judgment against Worboys under section 151. The first two requirements were satisfied for the purposes of this preliminary issue, in that a certificate of insurance had been provided to Worboys, and it was assumed that a judgment would be obtained by each of the claimants against him. The two remaining requirements were that the judgments to be obtained would relate to a liability covered by section 145, and that the claims of the claimants were covered by the terms of the policy.

A determination of whether the requirements above were satisfied led to a need for the following issues to be decided by Silber J, and these were:

  1. Did the bodily injuries suffered by the claimants  “arise out of the use of the [Worboys’] vehicle on a road or other public place” within the meaning of section 145 (3) (a)?
  2. Was liability in respect of Worboys’ acts of poisoning and sexual assault required by section 145 (3) (a) to be covered by a policy of insurance, and was it covered by the policy issued by the insurer?
  3. Was Worboys’ use of the vehicle at the material times a use insured by the policy?

Mr Justice Silber decided these issues as follows:

  1. In order to decide whether the injuries suffered “arise out of the use of the taxi on a road” the activities of the driver had to be looked at, and the acts of poisoning and of committing or of attempting sexual assaults had been part of a separate criminal exercise and were not causally connected to the use of the car on the road;
  2. The injuries which the claimant had suffered did not arise out of Worboys’ use of a vehicle on a road and so there was no requirement under section 145 (3) (a) for them to be covered by insurance, and the policy issued by the insurer, which covered “accidents involving your vehicle” could not be interpreted so as to cover deliberate poisoning and sexual assaults;
  3. The “use” of Worboys’ vehicle at the material times was not a use insured by the policy. The insurance policy stated that it provided cover for “social, domestic and pleasure purposes and for use for public hire” but, by the time of the claimants being sedated and assaulted, the character and purpose of the journey were such that the primary and essential purpose of the journey was of committing sexual assaults.

In thus deciding the issues above, Silber J held that the insurer was not liable pursuant to section 151 to satisfy any judgments obtained against Worboys. 

The final case in the field of motor insurance is that of EUI Limited v Bristol Alliance Limited Partnership.6 The appellant motor insurer appealed against a first instance decision where it had been held that the respondent property insurer had been entitled, through a subrogated claim via its assured, to recover losses incurred when the motor insurer’s driver, for whom a certificate of insurance had been issued by the motor insurer, had caused damage in excess £200,000 when he had deliberately swerved into a wall and had consequently flown into the windows of a House of Fraser store.

It was common ground that the damage had been caused by a deliberate act, a suicide attempt. The motor insurer’s policy did not, however, contractually indemnify its driver for damage caused by a deliberate act. The driver was, therefore, uninsured for the damage. The MIB would not compensate the claimant who had sustained the property damage because the scheme set up for Compensation of Victims of Uninsured Drivers excludes those victims of property damage where such damage was insured by the victim’s own insurer who then brings a subrogated claim for recovery.

The respondent property insurer had successfully contended at first instance that on the proper construction of the policy, sections 145 and 151, and the European Motor Insurance Directives, the appellant motor insurer had to cover damage whether deliberately caused or not.

The Court of Appeal allowed the motor insurer’s appeal. It was held that the fact that liability for damage arising out of a deliberate act was expressly excluded in the driver’s policy did enable the motor insurer to avoid incurring an obligation to satisfy a judgment against the driver under section 151. Of course in the more usual case of a claim for personal injury the motor insurer would have been required to satisfy the liability in any event passed on from the MIB under Article 75 of the MIB’s Articles of Association, but because of the exclusion of a subrogated claim for property damage in the MIB scheme, there was no such consequent obligation on the motor insurer. It was held by Ward LJ that the MIB Scheme, along with the Road Traffic Act 1988, satisfied “the aim and the spirit of the Directive to ‘enable third party victims of accident caused by vehicles to be compensated for all damage to property and personal injuries sustained by them’”. In the instant case the property owner had not been able to acquire compensation from the motor insurer, but this was because it had already successfully made a claim against its own property insurer, and the inability of the property insurer to present a subrogated claim to the MIB was consistent with the intentions stated in the Fourth Motor Insurance Directive.