The Government has confirmed that changes to the Road Traffic Act, specifically section 152(2), will come into effect on 1 November 2019.
From 1 November, insurers will no longer be able to place reliance on a declaration obtained after an accident date which confirms their entitlement to void a policy, and therefore avoids liability to third party victims under the Road Traffic Act.
The Government had previously conceded in the matter of Roadpeace v Secretary of State for Transport that s152(2) was incompatible with EU law. Avoiding a policy to defeat a third party claim was incompatible with the Motor Insurance Directive, and this change has been long expected.
What do insurers need to do?
Insurers looking to place reliance on a declaration obtained after an accident date need to obtain that declaration by 31 October 2019. The Regulations will not have a retrospective impact.
Regulation 8(1) states that:
"[The new section 152(2)] applies if, immediately before 1st November 2019, an insurer was exempted from paying any sum under section 151 of the Road Traffic Act 1988 in connection with a liability as a result of a declaration obtained by the insurer under section 152(2) of that Act before that date."
Insurers would therefore be well advised to identify claims within their portfolios where they currently have valid grounds for avoiding the policy and seeking a declaration – whether under the Part II of the Insurance Act or the Consumer Insurance (Disclosure and Representations) Act.
Post 1 November 2019, any declarations obtained before an accident date will still allow insurers to avoid liability to third party victims.
New wording of Section 152(2)
Section 152(2) of the Road Traffic Act will now state that:
(2) No sum is payable by an insurer under section 151 of this Act in connection with any liability if, before the happening of the event which was the cause of the death or bodily injury or damage to property giving rise to the liability, the insurer has obtained a declaration
(a) that, apart from any provision contained in the policy or security, he is entitled to avoid the policy [under either the Consumer Insurance (Disclosure and Representations) Act 2012 or Part 2 of the Insurance Act 2015 or the security] on the ground that it was obtained
(i) by the non-disclosure of a material fact, or
(ii) by a representation of fact which was false in some material particular, or
(b) if he has avoided the policy [under either the Consumer Insurance (Disclosure and Representations) Act 2012 or Part 2 of the Insurance Act 2015 or the security] on that ground, that he was entitled so to do apart from any provision contained in the policy or security
and, for the purposes of this section, “material” means of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions.