Whether UK government was entitled under EU law to exclude cover for an uninsured driver where the car was being used to further a crime
As detailed in Weekly Update 46/11, the claimant suffered severe personal injuries when the car in which he was a passenger crashed due to the driver’s negligence. The driver’s insurers had avoided his motor insurance policy (on the ground, inter alia, that he had not disclosed, or had misrepresented, that he was a habitual cannabis user) and so he claimed under the Uninsured Drivers’ Agreement 1999 (“the Agreement”). The Court of Appeal held that his claim failed because of clause 6(1)(e)(iii) of the Agreement, which excludes a claim by a claimant who has allowed himself to be carried in a vehicle if he could reasonably be expected to know, or ought to have known that “the vehicle was being used in the course or furtherance of a crime”. Here, the judge had found that the purpose of the car journey had been to collect and transport illegal drugs (cannabis) for subsequent re-sale. (A defence of ex turpi causa failed, on the basis that the joint criminality was only the occasion, and not the cause, of the accident)
The claimant then brought proceedings against the Secretary of State for Transport, arguing that clause 6(1)(e)(iii) was incompatible with the relevant EU Directives (specifically, Article 1(4) of Directive 84/5 (the Second Directive), which provides for only one exclusion: namely, where a person voluntarily entered the vehicle knowing that it was uninsured. This is a separate ground for exclusion of a claim under clause 6 of the Agreement). Jay J held as follows:
- Article 1(4) does apply where a valid insurance policy was taken out but subsequently was avoided. It is not confined to situations where there was no valid insurance taken out in the first place. A raft of ECJ decisions has made it clear that a situation cannot arise whereby an insurer’s avoidance of liability leaves a victim without any remedy at all.
- Articles 1(4) and 2(1) of the Second Directive require Member States to ensure that compensation is paid in all circumstances, save those expressly excluded within the text of those provisions. ECJ caselaw has made it clear that Member States cannot carve out additional exceptions.
- Clause 6(1)(e)(iii) is not consistent with the specific exceptions permitted by the Second Directive. Nor is it a sub-set of the separate exclusion relating to uninsured vehicles (the argument having been run that everyone knows that a vehicle being driven in the course or furtherance of crime is uninsured).
The judge went on to conclude that the defendant was guilty of a serious breach of Community law, entitling the claimant to compensation.
COMMENT: This decision will have no impact on motor insurers, who remain entitled to decline cover where a claimant has allowed himself to be carried in a vehicle being used to further a crime. Instead, the insurer of last resort, the Motor Insurers’ Bureau, will no longer be able to refuse compensation on that basis.