In an Order published on 14 February, the Court of Justice of the EU showed it continues to interpret the scope of compulsory insurance in the Motor Insurance Directive, widely to give maximum effect to the protection of injured parties. This will come as little surprise given its approach since Vnuk in 2014.
A BLM case heard in the High Court last week involves significant questions of jurisdiction under the recast Brussels I Regulation (reg 1215/2012), certain of which had been aired in the recent cases of Lackey* and Cole*, which will be familiar to those involved in cross-border litigation. The novel question in the current case – probably of greatest interest to insurers – was whether a territorial scope clause in the policy between insurer and insured had the practical effect of barring the third party claimant from accessing the favourable jurisdiction options set out in section 3 of the regulation.
The Court has unanimously held that liability to meet an injury claim arising from the use of an uninsured vehicle off-road falls to the MIB. Subject to any further appeal, which may well be likely, the effect of the decision would be to extend MIB’s obligations beyond the scope of compulsory insurance as defined in the Road Traffic Act 1988 (RTA). This judgment on appeal in Lewis v Tindale and MIB has followed relatively quickly after the first instance decision last September, which we analysed here.
First thoughts on possible wider implications of the appeal
It has been clear since 2014 that certain aspects of our motor insurance law are, following the Vnuk v Zaraovalnica decision of the Court of Justice of the EU in 2014, out of step with the European Motor Insurance Directive. As that is politically awkward – because of the obvious unattractiveness to the Government of amending English law to harmonise it with Europe – nothing has been done about it for five years.
While that’s hardly ideal, it might have been fair enough if the Government paid claims which fall in the gaps between our law and the European standard. But the Court of Appeal yesterday was very clearly bound, by another more recent CJEU case Farrell v Whitty (No 2), to conclude that liability for those claims should fall on the MIB, with the Government not being directly involved at the appeal stage.
The real problem here is not so much where this liability actually sits as the fact that it is simply not something that the MIB is currently funded to meet. So meeting these sorts of claims in the future – if the decision stands – would amount to a new cost for motor insurers and the premium-paying public and something for which it is very difficult to estimate the likely aggregate cost.
The prospect of a further appeal in this case and, ultimately, a renegotiation of the insurance industry’s agreements with Government relating to the scope of the MIB’s functions and roles are foreseeable courses in the short and longer terms respectively.
Brief analysis of the decision of the Court of Appeal
The judgment is heavily coloured by the relatively recent European case law noted above. Vnuk extended the meaning of the Directive’s requirement for compulsory motor insurance beyond that in the RTA and Farrell resolved that MIBI was an emanation of the (Irish) State for these purposes which, given that MIBI is closely modelled on and operates very similar to the UK Bureau, led ineluctably to the same outcome for the latter.
The Court of Appeal had to look beyond Farrell, however, in order to decide if the MIB was an emanation of the state only for the purposes of those liabilities set out the in RTA or rather in respect of the wider post-Vnuk liabilities under the Directive. Framed another way, the key point was the extent of the state’s – the UK Government’s – delegation to the MIB of its (ie the state’s) obligation under the Directive to provide a system of compensation where the use of vehicles is uninsured.
If the Government had delegated the full (ie post-Vnuk) obligation to the Bureau then it (the Bureau) would be liable in this case. But if the delegation to the MIB was just in respect of the liabilities which the RTA required to be insured – leaving a residual discretion to the Government regarding the post-Vnuk liabilities – then the MIB could not be liable.
The judgment of the Court was given by Flaux LJ, who drew from the recent European case law and his own decision in Byrne v MIB in the High Court. On the crucial question above, he found as follows:
“I do not consider that the UK government has retained a discretion to delegate to some other compensation body than the MIB the residual liability to compensate those injured by uninsured vehicles on private land. The argument that the government retained such a discretion where it had failed to transpose all its EU law obligations under the Directive correctly into national law was run in Byrne … and rejected by me … I concluded that the relevant discretion had been fully used in circumstances where the UK had chosen to designate the MIB as the body through which it sought to implement the Motor Insurance Directives. That conclusion was not challenged on appeal. I see no reason to reach a different conclusion in the present case.”
He went on to find that the state’s obligations under the Directive – delegated widely to MIB as immediately above – were unconditional and precise and they therefore had direct effect as between the claimant and the MIB, meaning that the claimant would succeed against the Bureau (and therefore would not need to make a separate Francovich claim against the Government). His analysis was as follows:
“… the MIB, albeit a private law body, has had conferred on it by the UK government the task under [the Directive], which as Farrell v Whitty (No 2) makes clear, includes remedying the failure of the government to institute in full a compulsory insurance regime, in the present case in respect of the use of vehicles on private land … Accordingly, like the MIBI, the MIB is an emanation of the State against which [the Directive] can be enforced by the claimant, as it has direct effect.”
Immediately after this passage, however, he took care to point out that the MIB may have rights against the Government in respect of this liability, observing that:
“The MIB may well have rights of contribution over against [sic] the Department of Transport. Indeed, we were informed [by counsel] that the MIB has issued a Contribution Notice against the Department in the present proceedings.”
With those proceedings underway and with the prospect a further appeal to the Supreme Court – to say nothing of the likelihood of Brexit intervening in the next few months – it is certainly far too early to look for a comprehensive understanding of the ramifications of this case and challenges it may raise for the MIB, its members and the Government.
Written by Alistair Kinley, director of policy and government affairs at BLM