The claimant, a national road safety charity, alleged that various provisions of UK law governing compulsory motor insurance and compensation for the victims of uninsured drivers contravene EU law. Those arguments included the following:
(1) It was claimed that UK statutes which permit insurance policies to include limitations and exclusions on the use insured (eg confining the use of vehicle to "social, domestic or and pleasure use") contravene the EU Sixth Directive. It was also claimed that section 2(4) of the Third Parties (Rights Against Insurers) Act 2010, which allows an insurer to raise, against the innocent third party, rights which the insurer had against the policyholder similarly qualified the absolute protection which the claimants said the Directive required.
Those arguments were rejected by Ouseley J. He said that "It would be remarkable if, without spelling it out in so many words, the CJEU had decided … that any use which could be made of a motor vehicle required compulsory insurance. The structure of the Directive protects third parties where the use is not covered by the terms of the compulsory cover. It would be a more expensive process to obtain insurance, yet quite unnecessary for the achievement of the Directive's purposes, with attendant needless criminalisation; indeed it could create a perverse incentive to avoid insurance at all".
Accordingly, a policy can lawfully limit or exclude particular uses, which are then recognised as uninsured by the Motor Insurers' Bureau. Similarly, the same defences could be raised by insurers against innocent third parties, provided those defences did not go wider than those which the insurer is entitled to raise against the policyholder: "It would be a strange result if exclusions or grounds for avoiding the contract which could not be raised as against the third party in proceedings against the insured, could nonetheless be raised in direct proceedings against the insurer".
(2) It was, however, accepted that UK law was no longer compatible with the Directive to some degree following the CJEU decision in Vnuk (see Weekly Update 34/14). That decision had held that Article 3(1) of Council Directive 72/166/EEC (which provides that compulsory motor insurance is required to cover civil liability in respect of "the use of vehicles" which are normally based in the territory of a Member State) must be interpreted as meaning that the concept of the "use of vehicles" covers any use of a vehicle that is consistent with the normal function of that vehicle. Accordingly, it is not compatible to restrict compulsory insurance to the use of a motor vehicle "intended for use on roads" and to its use "on a road or public place". The judge therefore concluded that an appropriate declaration to this effect should be granted.