The Uninsured Drivers Agreement 2015: A shocking conflict of interest

The authors of the Uninsured Drivers Agreement 2015 have failed to undertake a comprehensive comparative law review to ensure that it complies with the minimum standards of compensatory protection required under European law, argues Nicholas Bevan

After a delay of over two years, the Department for Transport finally posted its formal response to its February 2013 consultation on reviewing its arrangements for guaranteeing the compensatory provision of motor accident victims on 3 July 2015.

The DfT has also posted a link to the new Uninsured Drivers Agreement 2015 which is available to download from the Motor Insurers Bureau’s website. The new agreement is confined mostly to the DfT’s original proposals and it comes into effect on 1 August 2015.

Implementation of European law

The scope and nature of the duty to take out third party motor insurance and the extent of that third party cover are governed by Part VI of the Road Traffic Act 1988 and the European Communities Rights Against Insurers Regulations 2002. There are also two extra-statutory schemes that are supposed to provide compensatory safeguards for victims of uninsured and untraced drivers, currently the Uninsured Drivers Agreement 1999 and the Untraced Drivers Agreement 2003.

Although the transport minister is responsible for overseeing both the statutory and extra-statutory schemes, the motor insurance industry has considerable influence and the Motor Insurers Bureau (MIB) – whose board comprises senior officers from the every major motor insurer – usually drafts the fine detail of the two extra-statutory schemes.

Conflict of interest

There is an obvious and very real conflict of interest between on the one hand the general public’s need for an inclusive and complete compensatory guarantee that ensures that accident victims recover their full legal entitlement for their injuries and loss and, on the other, the motor insurance industry that operates in this captive market.

Over the years, the compensatory protection provided by the expensive motor insurance premiums that law abiding road users are obliged by law to purchase have been watered down.

The extra-statutory schemes that the MIB manages are tediously long, unnecessarily complicated and packed with exclusions and restrictions of liability with draconian strike out clauses that provide the MIB with unjust windfalls for the least procedural infraction.

The flaws in the statutory and extra-statutory scheme were thrown into a sharp focus in two recent Court of Appeal judgments.

In EUI v Bristol Alliance Partnership [2012] EWCA Civ 1267 the court came to a unanimous, if bizarre, conclusion that although the 1988 Act requires motorists to be insured against any use they make of their vehicle, motor insurers have no corresponding duty to provide that cover. The 1988 Act allows insurers to ring fence their liabilities save to the limited extent to which they are expressly prevented from doing so in that Act.

In Delaney v Secretary of State for Transport [2015] EWCA Civ 172 the Secretary of State for Transport was held liable in damages for permitting the introduction into the Uninsured Drivers Agreement 1999 exclusions of liability that were clearly and obviously unlawful because they breached the minimum standard of compensatory protection required under European law.

It was very revealing that the Department for Transport was unable to explain, let alone justify, its reasons and this led many, including this author, to surmise that this is because successive ministers have effectively surrendered part of their prerogative in this area to the vested interests of the motor insurers who actually draft the agreements.

However, this is an area of our domestic law that is supposed to implement the minimum standards of third party compensatory protection required under European law. The primary source of this European law is a series of European directives on motor insurance, culminating in the sixth consolidating directive of 16 September 2009 (2009/103/EC).

The European Law in a nutshell

The European directives on motor insurance are a pragmatic measure designed to ensure that motor accident victims receive comparable treatment across the EU. Their joint aim is to facilitate the free movement of people and vehicles within the European Economic Area and to protect victims. They do not seek to interfere with the autonomy of the insurer/policyholder to agree their own terms and pricing. Their simple aim is to ensure that third party motor cover is fit for purpose and that victims actually recover whatever compensation they would be entitled under national law.

This law can be summarised in the following six core principles (three of which apply to the insurance requirement; the remainder to the MIB’s role):

The third party insurance requirement

1. The duty to insure and the scope of cover are coextensive.  In other words, member states must ensure that authorised motor insurers provide third party cover that is fit for purpose (from a third party claimant’s perspective). In practical terms, what this means is that, in so far as third party victims are concerned, the policy should be good for any use actually made of the vehicle[1].
2. The nature of the third party cover is wide and inclusive and it extends to:
   • almost any use[2];
   • almost any motorised vehicle [3];
   • anywhere on land[4].
3. Member states have no discretion to introduce their own exclusions or restrictions of liability, save to the extent expressly permitted the directives. Nor can the laws of a member state undermine the effectiveness of the directives.[5]

The Motor Insurers Bureau’s role

4. The MIB’s role, is strictly circumscribed. It is a last resort, only to be utilised where:
   • the vehicle responsible for causing the loss or injury is untraced, or
   • where there is absolutely no insurance in place, or
   • where the insurers can prove the claimants had actual knowledge at the time they entered the vehicle in which they was riding that it was stolen, where the insurer has also excluded that particular liability in its policy terms[6]

5. The MIB must compensate at least up to the limits of the third party motor insurance obligation. In doing so it must apply the EU law principles of equivalence and effectiveness in comparison with the available common law and statutory remedies.[7]
6. The MIB can only exclude liability to compensate a victim of an uninsured driver where it can prove that the victim had actual knowledge at the time they entered the vehicle in which he or she was riding that it was uninsured.

This then is the benchmark by which the United Kingdom’s statutory and extra-statutory provision falls to be measured.

An empty consultation

Legal professionals and organisations who represent claimants have become inured over the past decade to the fact that many consultation exercises seem to be no little more than mere window dressing, designed to immunise the general public to executive decisions that have already been made in private. This view seems to be particularly apposite in this instance.

The minister’s consultation was launched on 28 February 2013, a few weeks before ‘Jackson day’, just when most practitioners could be expected to be preoccupied with fire fighting the governments botched implementation of the most extensive civil justice reforms in living memory.

Even so, the minister received numerous warnings that his Review of the MIB Agreements was flawed and that extensive wide-ranging reform was necessary that spanned the primary legislation imposing the duty to take out third party insurance as well as both MIB Agreements. These warnings have been mostly, if not entirely, ignored.

Serious breaches of European law minimum standards

I submitted a detailed paper in April 2013 that identified over forty potential infringements of EU law ranging across our statutory and extra statutory provision and which also offered potential solutions. It also warned the minister that his attempt to redefine the furtherance of crime passenger exclusion in Question 18 conflicted with basic EU law.

Some of these concerns were subsequently vindicated by the Court of Justice in Damijan Vnuk (Case C-162/13) and by the Court of Appeal in Delaney. Further infringements of European law have since come to light.

Then last week, after over two years of inaction, the transport minister announced the latest version of the Uninsured Drivers Agreement, again without any proper consultation. Just as in 1999, the new agreement is packed with unlawful exclusions and restrictions in liability that serve the commercial interests of motor insurers at the expense of the accident victims the scheme is supposed to protect.

Given the numerous explicit warnings and the recent judgments confirming their veracity, this raises legitimate concerns over basic competency and good faith in the Department for Transport.

A curate’s egg

Some aspects of the new Uninsured Drivers Agreement 2015 are welcomed.

The removal of the MIB’s ability to strike out valid claims for trivial procedural infractions and the simplification of the claims process are both positive steps and they make the agreement that much shorter.

However, these unjust provisions should never have been permitted in the first place and nothing has been done to revoke their effect in the thousands of claims left to run under the current discredited regime.

Worse still, there remain over ten provisions that appear to conflict with the European law minimum standards mentioned above. These include at least two unlawful exclusions of liability, wrongful deductions from compensation and, what appears to be an appeal procedure that undermines the effectiveness of the aims of the directive by requiring an arbitrator to consider appeals without reference to the European law context.

So when viewed as a whole, the good parts are outweighed by the bad.

We were promised a new Untraced Drivers Agreement back in 2013. This is long overdue as the 2003 Agreement is also riddled with unjust provisions that conflict with EU law minimum standards. However, it has taken the DfT over two years to implement the proposals from its February 2013 consultation exercise on reforming the MIB Agreements, so Heaven only knows when it will act to reform the Road Traffic Act 1988, the EC Rights Against Insurers Regulations 2002 and the Untraced Drivers Agreement.

Call to action

Our national law provision for ensuring the compensatory protection of accident victims simply cannot be taken at face value. Successive ministers have allowed this to become skewed to suit the commercial interests of the powerful insurance lobby.

It is vitally important that legal representatives appreciate that whilst our national law provision is badly flawed, proper redress is available in the courts, as the Delaney decision confirms. Competence in this area of legal practice requires a good understanding of the relevant EU law and its remedies.

 

Nicholas Bevan is a well known speaker, legal consultant and trainer who provides bespoke in-house training on motor insurers liability and general motor claims liability

 

Footnotes

[1] In this, the Court of Appeal’s decision in EUI v Bristol Alliance Partnership is clearly wrong as it is impossible to reconcile this with the superior binding authority of the European Court of Justice’s rulings in Ruiz Bernaldez in 1996 (Case C-129/94) and Damijan Vnuk in 2014 (Case C-162/13).

[2] i.e. It must be consistent with the normal mechanical function of the vehicle, see Damijan Vnuk

[3] i.e. ‘any motor vehicle intended for travel on land and propelled by mechanical power, but not running on rails, and any trailer, whether or not coupled’, see the article 1 definition in the Sixth Directive

[4] i.e. Including private property

[5] See Candolin v Pohjola and Others 2005 CJEU (Case C-537/03) and Evans v SoS for Transport and MIB 2002 CJEU (Case C-63/01

[6] See Churchill v Wilkinson 2011 CJEU (Case C-442/10) and Gábor Csonka and others v Magyar Állam 2014 CJEU (Case C‑409/11).

[7] See Evans v SoS for Transport and MIB 2002 CJEU (Case C-63/01)