Compulsory motor insurance is Vnuk’d

In a long-awaited judgment, the UK High Court has called for the UK to extend compulsory motor insurance to vehicles used on private land. The decision could have widespread implications for corporates. They may have to insure a whole host of different vehicles, such as forklift trucks and golf buggies, for the first time. This is not specifically a UK issue because the decision is based on a European ruling and the compulsory motor cover requirements will potentially be EU-wide. In RoadPeace v Secretary of State for Transport and MIB, the claimant road safety charity alleged that various provisions of UK law governing compulsory motor insurance contravened EU law. This followed the European Court of Justice’s (ECJ) interpretation of the Motor Insurance Directive (MID) in the 2014 Vnuk case. Vnuk was a Slovenian case that involved a tractor being manoeuvred in a farm courtyard when it hit a ladder on which the claimant was stood, causing him injury. The matter was referred to the ECJ, which extended the definition of “use of a motor vehicle” to include any use consistent with the vehicle’s “normal function” – which is not limited to use of the vehicle as transport on a public road. The ruling has been interpreted as requiring compulsory insurance for any vehicle used on private property, which is currently inconsistent with UK law. Perhaps unsurprisingly in light of the ECJ’s interpretation, the UK’s High Court held that compulsory motor insurance in the UK applied to any vehicle being used anywhere, for any purpose for which it was intended. Current compulsory insurance restrictions requiring a vehicle to be “intended for use on roads” or “on a road or public place” are not permitted under the MID. The judge concluded that an appropriate declaration to this effect should be granted, although no timetable has yet been set for amending domestic UK legislation. While there is no impact on UK motor insurance arrangements at present, recent UK decisions have already begun to widen the scope for motor insurance as a result of Vnuk. In UK Insurance Ltd v R&S Pilling, it was found that damage to premises caused by fire resulting from repairs being carried out to a vehicle was covered by that vehicle’s motor insurance. In Wastell v Woodward it was held that a hamburger van parked in a layby, with the purpose of conducting a business, constituted use of a vehicle on the road. In light of this developing body of domestic and European law, the increased cost and administrative burden on business is becoming ever more acute. Such a wide scope includes many vehicles traditionally insured under employers liability/public liability policies, calling into question the need for such wide-ranging provisions. Other risks, such as mobility scooters, arguably do not need explicit motor cover at all. Accordingly, there is a need to bring certainty to this area of the law and for the exact remit of the Vnuk judgment to be clarified. Both the UK and Brussels have consulted on the Vnuk problem. In its most recent 2017 consultation, the EC sought views on four alternative options for amending the MID. No preference was given by the EC. This is contrary to its previous consultation, in which it preferred to amend the scope of the directive to the use of vehicles “in traffic”. This could be a worrying development that will have ramifications for EU corporates and insurers if the EC moves away from the business as usual option. Industry bodies have already raised concerns about the consultation, believing the amended directive option, which will require drivers to hold third-party insurance while driving on public land, will be difficult to enforce and could lead to increased fraud. Indeed, it may provide a fresh hunting ground for claimant solicitors and claims management companies seeking to secure new revenue streams as historical business lines dry up, ultimately leading to an increase in costs. European insurers and guarantees funds have advised they favour the “in traffic” amendment to the MID, to reflect a narrower compulsory insurance obligation than is implied in Vnuk. It is to be hoped that the weight of responses from these insurers and government bodies is persuasive and the EC adopts this sensible and workable approach as soon as possible to this runaway area of the law. This is not an issue that will disappear in the UK after Brexit. The harmonisation of motor insurance across Europe, to ensure equivalency of motor policies, may require the UK to remain within the previsions, whatever they may be. In this scenario, we will have the added uncertainty of the status of ECJ decisions past and present to contend with, and risk managers will have to consider the extra cost of adding additional classes of vehicle to their motor insurance cover. Contributed by Mark Hemsted Clyde & Co, Partner, Manchester.

Compulsory motor insurance is Vnuk’d

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