Motor insurance: changes and challenges
Starting point: the obligation to insure
The European Union has attempted to harmonise the rules relating to vehicle insurance. The obligation to insure currently arises under the Motor Insurance Directive (2009/103/EC of 16 September 2009, MID). MID provides that each Member State shall “take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance.”
In the UK, the implementation of MID provides that the legal minimum requirement is third party insurance. This means vehicle users need to be covered for accidents causing damage or injury to another person, animal, or property. On the other hand, if the vehicle is kept off road it is possible to apply for a statutory off road notice (SORN). SORN vehicles are exempted from the obligation to insure under the UK’s domestic implementation of MID.
To insure or not to insure: a popular question
In 2006, in Portugal, a car crashed killing the driver and two passengers. The driver was the car owner’s son. He had taken the car without permission. The car was registered and in working order, but had been kept stationary and uninsured on private land as the owner no longer felt able to drive following the deterioration in her health. A state fund paid compensation to the passengers’ families; it then then brought a civil claim against the owner to recover the cost under Portuguese law. The question posed to the European Court of Justice (ECJ) in Juliana (as the case came to be known) was: is there an obligation to insure a car kept stationary on private land?i
In Andrade (also in Portugal, in 2006), a stationary tractor, used to power a device spraying herbicide, fell down the terraces of the vineyard it was treating. A farm worker was killed. In this case, the ECJ considered whether the insurance obligation for "use of a vehicle" under MID arises when a vehicle is stationary (with its engine running), and whether it arises where that vehicle is a tractor being used on private land, rather than as a means of transport?ii
A year later, in Slovenia, a tractor on private land injured an individual by knocking him off a ladder. In the resultant case, known as Vnuk, the ECJ considered the question: does a tractor driven on private land constitute a use of a vehicle to which the MID compulsory insurance obligation applies?iii
In 2014, the ECJ delivered its judgement in Vnuk. There were two stages to its deliberations. First, the machine must fall within the definition of "vehicle". Any vehicle intended for travel on land and propelled by mechanical power, but not running on rails, and any trailer, whether or not coupled, falls within the definition of “vehicle” under MID,iv regardless of the use to which it is put. Second, the ECJ considered "use". If a tractor is being used consistently with its normal function (i.e. as a vehicle), then it falls within the ambit of MID – irrespective of where that use took place.v This decision was met with some surprise and contradicts the UK’s approach to implementing MID, where the insurance obligation depends upon whether the vehicle is used on public roads. It opens the possibility that vehicles never intended to be used on public roads (such as farm vehicles, quad bikes and golf carts) need to be insured.
"Use" and function were further considered by the ECJ in Andrade. In line with Vnuk, the ECJ acknowledged that whether the compulsory insurance obligation applies does not depend upon whether or not a vehicle is moving, whether its engine is running or where it is used. However, it was persuaded that machines can have multiple functions - in this case, as a means of transport, and as a mere generator of motive power - and that the obligation to insure only arises where its principal use is as a means of transport. On the facts of the case, at the time of the accident, the tractor was not being used principally as a transport. Therefore the use to which it was put did not fall within the obligation to insure.
In Juliana the ECJ determined that, for the obligation to insure, it is irrelevant whether a car is kept stationary on private land and there is no intention to drive the car. As long as a vehicle is capable of being driven on a public highway and it has not been officially withdrawn from use (by being deregistered in accordance with national law), it must be insured.
Andrade creates confusion
At first blush, the ruling in Andrade appeals to common sense; the requirement to insure the “use of vehicles” should apply only where a machine is principally used as a vehicle. However, in practice, linking the right to recovery in case of harm to the precise function of a vehicle at the time it causes injury or damage can give rise to capricious results. It might seem arbitrary, for example, that the obligation to insure would not apply to a stationary tractor when used principally as a motor generator, but (following Juliana) would apply to an equally stationary car that its owner never intended to be used at all.
A second difficulty is mixed use. For example, what "function" would a tractor which inches along as it gathers corn fall under? Will any movement at all trigger a requirement to insure, or would the court seek to identify a "leading" function?
Vnuk, Juliana and the UK perspective
The ECJ’s judgments generate uncertainty for owners of vehicles not traditionally thought to require insurance. Juliana implies that individuals who do not think their vehicle requires insurance must rely upon their nation’s formal procedures to withdraw a vehicle from use (such as the SORN regime in the UK); taking personal steps never to use the vehicle as transport are not enough to avoid the insurance requirement. However, while Andrade may have reined in the ECJ’s ruling in Vnuk as regards ‘dual use’ vehicles, the UK regime remains unaligned with the ECJ’s interpretation of MID. As a result, it may be that the SORN regime is not a safe haven against the obligation to insure, because its application to vehicles that are “off road” but nonetheless used as transport, may be open to challenge on the grounds that it does not comply with EU legislation.
In any event, the deficiencies in the UK’s implementation of MID may ultimately bring about changes to the SORN regime. Following Vnuk, the UK Department for Transport (DfT) ran a technical consultation between 20 December 2016 and 13 April 2017, recognising that the UK’s regime does not comply with MID as interpreted by the ECJ. The DfT’s preferred approach was to amend the UK’s regime to restrict the compulsory insurance requirement to vehicles used “in traffic” (i.e., as transport, whether stationary or in motion, in “areas to which the public has access” whether public or private). However, the DfT’s consultation appears to have stalled, with no outcome forthcoming.
Brexit is the final complicating factor. On 24 May 2018 the EU Commission issued their proposal to amend MID in light of the ECJ’s rulings, in particular, to clarify that “accidents caused during the normal use of a vehicle for the purpose of transportation, including its use on private properties, are covered” under MID.iv This is wider than the approach preferred by the DfT’s consultation. If the EU amends MID then, during any transition period agreed between the UK and the EU as part of a withdrawal agreement, the UK would remain subject to the EU regime and will be required to amend its domestic regime to reflect any such changes to the EU regime.
Andrade implies that machines with multiple functions may be caught by the insurance requirement only when used as transport. Nonetheless, Vnuk and Juliana suggest that the circumstances in which the MID insurance obligation applies are wide. With the EU proposing amendments to reflect this wide interpretation and the UK’s regime playing catch-up, the prudent approach may be to insure vehicles once thought to be outside the scope of MID, such as:
- farm vehicles that are stationary / used off road;
- collectible and replica vehicles that are capable of being driven (stationary or otherwise);
- stationary company cars;
- track cars; and
- cars used solely on personal estates.
i Case C-80/17 Judgment of the Court (Grand Chamber) of 4 September 2018 Fundo de Garantia Automóvel v Alina Antónia Destapado Pão Mole Juliana and Cristiana Micaela Caetano Juliana, Request for a preliminary ruling from the Supremo Tribunal de Justiça
ii Case C-514/16 Judgement of the Court (Grand Chamber) of 28 November 2017 Isabel Maria Pinheiro Vieira Rodrigues de Andrade and Fausto da Silva Rodrigues de Andrade v José Manuel Provença Salvador, Crédito Agrícola Seguros – Companhia de Seguros de Ramos Reais SA, and Jorge Oliveira Pinto.
iii Case C-162/13 Judgment of the Court (Third Chamber), 4 September 2014 Damijan Vnuk v Zavarovalnica Triglav d.d. Request for a preliminary ruling from the Vrhovno sodišče
iv Article 1(1) of Directive 2009/103/EC.
v The ECJ found that whether the tractor was in motion was a question of fact for the referring court to determine.