Motor Vehicles (Compulsory Insurance) Bill
The Motor Vehicles (Compulsory Insurance) Bill successfully passed through the Committee stage in the House of Commons
On 5 January 2022, the Motor Vehicles (Compulsory Insurance) Bill successfully passed through the Committee stage in the House of Commons; a step towards removing the financial burden of the CJEU decision in Vnuk from UK motor insurers and their customers.
The Presentation Bill describes itself as “A Bill to amend retained EU law relating to compulsory insurance for the use of motor vehicles; and for connected purposes”. It effectively re-states the position under the Road Traffic Act 1988 in respect of the definition of a ‘motor vehicle’ and where compulsory insurance is required.
Following Vnuk and the subsequent case of Lewis v Tindale, the UK motor insurance industry finds itself financially liable (via the MIB levy) for accidents involving uninsured vehicles in circumstances where compulsory insurance is not required. This arises from the decisions in Vnuk and Lewis and the imposition of EU law requirements which have been retained post-Brexit by the European Union (Withdrawal) Act 2018. The new Bill will remove the lingering effect of EU law in this area and re-state the position under the 1988 Act where motor insurance is required only for the use of motor vehicles on a road or other public place.
In his concluding remarks at the Committee, Peter Bone MP, the Bill sponsor, thanked various individuals who had assisted him, including Paul Ryman-Tubb of Weightmans.
The Bill still has two further stages to go through in the Commons before progressing its journey through the House of Lords. We will continue to monitor its progress and provide information and insights to clients in this area.
You can watch and listen to the Committee stage recording on-demand and you can read more about this issue in our previous article “Vnuk — the final chapter?” below.
Vnuk — the final chapter?
In this article, we look a little deeper into the announcement in February 2021 by the Transport Secretary of his “plan to scrap EU law, ensuring British drivers avoid £50 a year insurance hike” and discuss what this might mean in practice. The announcement relates to the effects of the decision of the European Court in the well-known case of Vnuk as long ago as September 2014.
Superficially, one might wonder why it is necessary for something to be ‘scrapped’ when it has not been implemented in the first place. However, the matter deserves closer examination than merely poking fun at the somewhat misleading headline. Further, watching the published YouTube video does not reveal any more of the detail or the government’s exact intentions.
The claimed estimated saving to the UK motoring public of £50 per year on premiums is a significant sum. The detailed actuarial analysis has been published and reveals a maximum anticipated annual cost saving of £2.3 billion. However, it is important to note that this figure was based on a Personal Injury Discount Rate (‘PIDR’) of 1% — it being uncertain at the time the work was carried out as to where the PIDR would land. History tells us of course that it landed at -0.25% meaning the estimated impact would rise further. Inevitably, any impact cost assessment has to be somewhat broad brush as it is impossible to be accurate in terms of the actual cost.
Few in the motor insurance industry will not be familiar with the Vnuk case and the angst it has caused. The issue goes back as far as 2007, when Mr Vnuk, a Slovenian farm worker, was knocked from a ladder whilst working in a hayloft by a reversing tractor with a trailer attached in a private farmyard. The motor insurer refused to pay and an argument ensued about the interpretation of the Motor Insurance Directive (2009/103/EC) (‘the Directive’) in relation to the extent of its requirements for compulsory motor insurance.
The European Court held that the Directive required insurance to be in place in respect of any use of a motor vehicle (‘motor vehicle’ is very widely defined as per Art 1 of the Directive as being any mechanically propelled vehicle save for one running on rails) which was ‘consistent with the normal function of the vehicle’. A later European Court clarification would add the words ‘as a means of transport’ to this phrase. Insurance was required for such use anywhere, including on private land.
These requirements can be contrasted with UK national law which, though in place for many years prior to the Vnuk decision, seeks to give effect to them, namely Sections 143 and 145 of the Road Traffic Act 1988 (‘the RTA’). The RTA only requires the use of motor vehicles on a ‘road or other public place’ to be covered by insurance (Section 143) and a motor vehicle is more restrictively defined as being one which is ‘intended or adapted for use on a road’ (Section 185) — here there is no reference to the words ‘or other public place’. Unhelpfully, no definition of ‘other public place’ is provided in the RTA, but it clearly cannot encompass all possible private land vehicle ‘use’ scenarios.
The thought of compulsory insurance for all manner of ‘vehicles’ (including golf carts, ride-on lawnmowers, mobility scooters etc.) as well as the necessity for all vehicles used on private land to be insured sent shock waves through the motor insurance and motorsport industries. The framework for the liability of the Motor Insurers’ Bureau (‘MIB’) has always been based upon the compulsory insurance requirements in the RTA. If such requirements were broadened, so would the exposure for MIB and, through its annual levy, this burden would be passed to motor insurers and the insuring public.
Real concerns were raised about the practicalities of enforcement, the opportunities for fraud and the sheer volume of claims that would result from the UK widening the compulsory insurance requirements in the RTA. The EU is going through a review of the Directive (REFIT) and the issues posed by Vnuk are part of that review. However, it is not yet known when or exactly how, if at all, that process will change the Directive.
Is Brexit the answer?
One might be forgiven for thinking that, from the end of the Brexit transition period on 31 December 2020, the problems arising from Vnuk might come to an end and that there is no need for the government to ‘scrap’ anything, given that the RTA has not been amended to give effect to the implications of Vnuk. However, this view would be mistaken.
The government announcement does at least suggest that no amendment will be made to the RTA to make it Vnuk-compliant, which is encouraging, but the government will need to do more than this to ensure that the ramifications of Vnuk do not continue to be felt.
One must consider here the European Union (Withdrawal) Act 2018 (the 2018 Act).
The 2018 Act effectively takes a ‘snapshot’ of EU law at the point of Brexit and ‘retains’ that in UK law until such time as new law is passed after 31 December 2020. As a result, much existing EU law as of 31 December 2020 operates as retained law in the UK unless or until it is overturned by legislation passed by the UK government. Moreover, the UK courts must have regard to existing decisions of and general principles enunciated by the European Court prior to 31 December 2020.
Anything the European Court (or indeed any legislative body of the EU) does after 31 December 2020 may be taken into account by a UK court “so far as it is relevant to any matter before the court” (Section 6(2)). Accordingly, for example, any decision made by the European Court after 31 December 2020 will be persuasive, albeit not binding on the UK courts.
This all means that already established general principles of EU law — including equivalence and directly effective rights for individuals — will continue to apply, as will the requirement for UK courts to interpret national law so far as possible so as to give effect to retained EU law (the Marleasing principle). The only way to bring an end to the application of such retained EU laws and principles is for the UK government precisely to legislate their cessation either completely or, more likely, in particular contexts where their application produces ongoing, unwanted results.
Alternatively, as regards pre-31 December 2020 decisions of the European Court, the Supreme Court (not any lower court) can overrule any particular decision. However, to do so, it “must apply the same test as it would apply in deciding whether to depart from its own case law” (Section 6(5)). So, not only does it take a considerable period of time for a case to reach the Supreme Court (although leapfrog applications may now become more prevalent from lower courts, bypassing the Court of Appeal), but also there must be special justification or strong grounds for the Supreme Court to depart from the existing EU case law.
Marleasing has already impacted the RTA definition of a motor vehicle. In Lewington v MIB  EWHC 2848, Mr Justice Bryan decided that a large earth-moving machine, described as a ‘large yellow Tonka toy’, met the definition of a ‘motor vehicle intended or adapted for use on roads’ in Section 185 of the RTA. He used Marleasing to interpret Section 185 so to give effect to the wider definition of ‘motor vehicle’ in Art 1 of the Directive. Accordingly, MIB was liable to compensate the claimant despite the fact that the machine in question was not strictly ‘intended or adapted for use on roads’.
The EU law principle of direct effect allows individual claimants to enforce rights conferred on them by the Directive directly against an emanation of the state. MIB is an emanation in the context of any directly effective, compulsory insurance rights.
In Lewis v Tindale and others  EWCA Civ 909, the claimant was injured by the defendant’s uninsured motor vehicle whilst on private land. Even though the applicable Uninsured Drivers Agreement did not apply to incidents occurring on private land (since it followed the compulsory insurance requirements of the RTA), the Court of Appeal held that, as an emanation of the state for these purposes, MIB was liable to meet the claim since the Directive required insurance for the use of vehicles on private land and this requirement gave rise to a directly effective right enabling the victim to seek compensation.
Further, there is the EU law principle of equivalence which essentially requires the equal treatment of victims in any circumstances falling within the ambit of the compulsory insurance requirements. This potentially has wide application.
The above commentary demonstrates how the motor insurance industry and thereby the motoring public remain exposed to the financial burden of claims arising in circumstances beyond those envisaged by the RTA alone, notwithstanding that the Brexit transition period has ended.
What might be done?
It would seem that the government is working towards removing the effects of Vnuk by legislative means. It appears that the government wishes to remove the compulsory requirement for insurance for vehicle use on private land. It also seems that certain vehicle types will be removed from the ambit of the compulsory insurance requirements, but it is not clear if the Section 185 definition will be amended to any extent. The government may choose to leave the definition as it is currently, but specifically legislate which vehicle types are excluded from the need for insurance in the future as has already been done for Electrically Assisted Pedal Cycles for example.
Section 6(7) of the 2018 Act provides that retained EU law, retained EU case law and retained general principles of EU law may be modified by the UK government through domestic legislation such that the courts must have regard to such laws and principles as modified by the legislative change. Insurers must hope that the legislative change is wide enough such that there will be no need for the Supreme Court to have to mop up any lingering effects of Vnuk by overturning EU laws and principles not legislated away by the UK government.
In short, the government needs to do more than simply leave the RTA as it is. It must at least positively legislate to explain what it intends even if the wording of the principal sections of the RTA in this context largely remain unaltered.
A considerable amount of work was done, particularly by the UK government in terms of consultation and impact assessment in the years following the Vnuk decision. The government was aware that the Directive might be altered so as to ameliorate the effects of Vnuk at least to some extent as a result of REFIT. Doubtless, this work is now being revisited to see if it could be used to shape UK law in a post-Brexit world.
We will be watching closely to see what the government does and will be assisting insurers and others by providing ongoing insights and assistance.
For guidance on any issues relating to Vnuk, contact our motor insurance solicitors.