European Parliament resurrects “use in traffic” for determining scope of compulsory motor insurance

The recent draft report from the European Parliament’s Internal Market and Consumer Protection Committee (IMCO) takes a very different approach to the Commission’s recommendations (made this May) for amending the scope of the Motor Insurance Directive (MID) and focuses on the use of motor vehicles in traffic.

While the Commission preferred a codification of the leading decisions – ie the Vnuk, Rodrigues and Torriero cases – the EP’s draft report* brings the idea of limiting the scope of compulsory motor insurance to use in traffic very much back to the centre of the debate. And, in respect of the sorts of vehicles subject to the regime, it proposes that

(i) only EU type-approved vehicles should fall within compulsory insurance, and
(ii) vehicles used exclusively for motor sports should be outside the MID.

From a risk and underwriting perspective, these draft recommendations from the EP are likely to be welcomed by motor and casualty insurance providers, given the uncertainties that currently arise because of the very wide scope derived from the three European Court cases mentioned above and currently favoured by the Commission (ie: any use of any motor vehicle, consistent with its normal function, as a means of transport and irrespective of the terrain on which it is used.) The report is also likely to be welcomed by the motor sports sector and by the e-bike industry, both of which have been lobbying heavily in order to secure their exclusion from the scope of the Directive.

The EP’s draft report is 48 pages long and the key points on scope are summarised below. The main points are that the seeks to:

  • amend the scope of the MID to
    • apply only to motor vehicles subject to the EU type approval regime (thereby excluding e-bikes, segways etc
    • clarify that use of a vehicle means use, consistent with the vehicle’s normal function, as a means of transport in traffic, irrespective of the terrain where it is used (meaning that insurance would be required for use on private land which is accessible to the general public), and
    • remove entirely from scope motor vehicles intended exclusively for motor sports activities in a closed area
  • reword the minimum level of property damage cover required so that it is per accident rather than per claim
  • replace the references to ‘victims’ with ‘injured parties’ on the basis that only the latter is defined in the MID and is a wider concept than the directly injured person (‘injured party’ means any person entitled to compensation in respect of any loss or injury caused by vehicles)
  • clarify that liability arising from the use of trailers must be insured and require the trailer’s insurer to meet claims where the identity of the tractor unit is not known

Although not covered in this article, it should be noted that the report also includes significant content on dealing with claims administration following the insolvency of a motor insurer providing services on a cross-border basis.

The draft report is scheduled to be discussed by the IMCO at its meeting in Brussels on 21 November, although the Committee is not scheduled to vote on it (or an amended version of it) until 29 January 2019.

Despite some risk of amendment to this draft report before a final version is adopted either by the Committee or by the European Parliament in plenary, it is nevertheless a welcome intervention in the debate on the scope of MID which has so far been characterised by a maximalist approach across both the European Court and the Commission. That approach has raised significant unintended consequences and practical problems which we have previously set out.

After the IMCO vote at the end of January we would expect a plenary vote of the full EP, following negotiations between the European institutions should take place with a view to an agreed text emerging later in the year. Whether the EP is able to complete this process before the next Parliamentary elections in May 2019 remains to be seen.
* The report is available here. The easiest way to approach it is by first reading the Explanatory Statement which begins at page 46.

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