Further European perspectives on motor insurance

Compulsory motor insurance across Europe currently is under the scrutiny of the European Commission, which is carrying out its REFIT review of the Codified Motor Insurance Directive. Although much of that is likely to focus on the challenges of the Vnuk decision, it seems that the other European institutions and stakeholders are also considering the future shape of potentially important aspects of motor insurance law.

In July, the European Parliament adopted a resolution on limitation in cross-border claims. This attempts to set down a minimum requirement of four years in such cases and includes a draft Directive to that effect. Whether this sort of length of time is really appropriate in the age of instant online access to any information is hardly the point: the proposal is out there and it merits serious consideration (especially so if it comes under the scrutiny of the Commission during its REFIT work).

The European Court of Justice has also been active recently in this space. Its decision in July in Fidelidade v Caisse Suisse C-287/16 reads very much as requiring Member States to provide that motor insurers who have avoided polices for non-disclosure have to meet subrogated claims in any event – a different outcome to that set out in English law.

Its decision just this week in Farrell v Whitty C413/15 might have more profound consequences. The case turned on the status of the Irish MIBI, with the key question being whether it was an emanation of the State. If it was, then the Directives would have direct effect against it, such that it could be sued directly in EU law. The Court has effectively held that it was, reasoning that “… a body or an organisation, even one governed by private law, to which a Member State has delegated the performance of a task in the public interest and which possesses for that purpose special powers beyond those which result from the normal rules applicable to relations between individuals is one against which the provisions of a Directive that have direct effect may be relied upon.”

What this is likely to mean in practice is that claims (such as Ms Farrell’s) not covered by the MIBI’s agreements but nevertheless within the scope of the Directive could now be brought directly against the Bureau under EU law. This could mean that a Francovich action against the Member State could be dispensed with in such circumstances. The relevance of the case to UK matters is that the MIBI’s organisation and operation is, for these purposes, virtually identical to that of the UK MIB and therefore the implications suggested above might also apply here.

The Council of Bureaux is not formally one of the European institutions (and therefore its agreements between national bureaux are not actionable in the ECJ, see Lithuanian Bureau v Dockevicius, C-587/15) but it obviously has a key role in administering the green card agreements. It is currently conducting a survey examining insolvencies of motor insurers which wrote business in other countries, prompted by recent insolvencies of a range of carriers (Enterprise and Setanta are likely to be the most well-known examples in the UK & Ireland).  It should be recalled that arrangements for dealing with motor insurer insolvencies are very much on the Commission’s radar, with a specific section on possible funding and options set out in the current REFIT consultation.

An omission from REFIT – perhaps surprisingly? – is the use of vehicles in terrorist incidents. A range of approaches applies across Europe: some states provide specific terrorism compensation schemes, others direct claims to general criminal injuries compensation schemes whereas others place the obligation to compensate injured people either on the motor guarantee fund or on the insurer associated with the vehicle used. Such a wide range of solutions is likely to mean that victims of terrorist incidents could receive different levels of compensation depending on whether their state allocates an incident – or even a phase within a terrorist incident in which a motor vehicle had played some part – to a motor insurance model or to criminal compensation schemes.

Whether that provides socially fair results for those killed or injured is a very live concern, alluded to this MIB insight article which concludes that “by virtue of the MIB Articles where there is a policy in place on the vehicle involved, individual insurers and their re-insurers are exposed to the costs of such incidents. Also highly relevant is this query raised by the UK Government in an early response to the Commission in the context of REFIT:

“Whether there is unhelpful overlap between this Directive [ie the Codified Motor Insurance Directive] and Directive 2004/80/EC (which ensures that each EU country has a national scheme in place which guarantees fair and appropriate State compensation to victims of violent intentional crimes), leading to disparity in how victims of terrorist attacks using motor vehicles are compensated compared with victims of terrorism injured by other means. This is an important issue to address in light of recent terrorist attacks using motor vehicles in Barcelona, Stockholm, Nice, Berlin and London.”

About the Author

akAlistair Kinley is BLM’s Director of Policy & Government Affairs.

Alistair is responsible for BLM’s engagement with government departments and regulators on policy and public affairs issues and consultations affecting the firm and its customers. He coordinated BLM’s market-facing activities in connection with the Insurance Act 2015 and the consultations which preceded its publication and introduction in Parliament.

He is a member of the Civil Justice Council (CJC), a regular speaker and experienced commentator on legal and procedural reforms and was a contributing editor to the Law Society’s Litigation Funding Handbook (September 2014).

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