Source: http://insurance.dwf.law/news-updates/2014/11/vnuk-ruling-does-this-decision-from-the-european-court-herald-a-change-in-uk-motor-policy-coverage/
Timestamp: 2019-04-19 03:02:30+00:00

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Vnuk ruling: does this decision from the European court herald a change in UK motor policy coverage?
A decision of the European court in September 2014 is likely to lead to a review of the compulsory motor insurance requirements of the Road Traffic Act 1998 in terms of the definition of “use” of a vehicle.
The case involved injury to a claimant farmworker who had been knocked from a ladder by a tractor which was reversing a trailer in a farmyard, on private property. The claimant sought damages for his non-pecuniary damage against the insurer with which the tractor owner had taken out compulsory motor insurance.
His claim failed initially on the basis that the requirement for compulsory insurance was limited to use of the tractor and trailer as a vehicle for road use and did not extend to cover situations where the use was as a machine or propulsion device.
On appeal, the Slovenian court referred the case to the Court of Justice of the European Union (CJEU) to determine whether the duty to insure “the use of vehicles” within the meaning of Article 3(1) of Council Directive 72/166/EEC covered the circumstances of the accident.
In the UK, the Directive is enacted in the Road Traffic Act 1988 and supplemented by the MIB agreements. However, ss.143 and 145 of the Act restrict the duty to take out third party motor insurance and the scope of cover to be provided by UK motor insurers to the “use of a motor vehicle on a road or other public place”. (In contrast to The Road Traffic Act, Slovenian law imposes no express derogation for use on private land.) S.185 also restricts the definition of “motor vehicle” to a “mechanically propelled vehicle intended or adapted for use on the roads”.
Along with other member states, the UK intervened in the proceedings arguing that the compulsory insurance requirement should not apply to the facts of this case.
Prior to the CJEU ruling the case was the subject of an Opinion from Advocate General Mengozzi (“the AG”). The AG found that a broad interpretation of movement and “use” implies no requirement for the vehicle to be on a road. Reversing a tractor in a farmyard must be regarded as use of a vehicle. The CJEU, as expected, followed this approach.
The reversing trailer propelled by a tractor was covered by the duty to insure in the Directive.
The fact that a vehicle, together with an attachment, can be used as agricultural machinery, does not affect its status as a “vehicle” for the purposes of Art 3(1).
Motor vehicle “use” covers any use of a vehicle that is consistent with the normal function of that vehicle.
The CJEU highlighted the entitlement of member states to derogate certain vehicles from the requirements of the Directive and the different approaches to the Directive currently adopted by the member states – some imposing the requirement of road use, some only use - and the importance of a consistent approach. The concept of use could not be left to the individual member states.
The CJEU considered the objectives of the EU legislation on compulsory insurance and in particular, the protection of victims of accidents. Bearing that in mind, they determined that “use of a vehicle” was intended to mean any use which was consistent with the normal function of the vehicle. The location where the vehicle is being used, whether on a road or elsewhere, does not affect the determination of whether a vehicle is being used.
Contractual liability for use envisaged by the CJEU will in many cases have been agreed and the premium paid. From the insurer's point of view it is very likely that in most cases there would be contractual insurance in place in a Vnuk situation. It is only where policy liability is declined or where obligations to hold insurance have been breached that the insurer would be affected by the widened scope of this interpretation.
Slovenian law requires insurance cover for “use of a vehicle”. The Slovenian courts had narrowed this requirement to “traffic” situations. However, the Slovenian statute was sufficiently broad to allow the CJEU to interpret “use” more widely.
there is a causal link between the failure in the breach of the obligation and the claimant's loss.
Vnuk will not have immediate impact on the application of the Road Traffic Act or on insurers in the UK but will lead to a review of the Road Traffic Act.
During the expected consultation to amend the Road Traffic Act, consideration will need to be given to countering the widened scope of liability by the effective use of permitted derogations. The Directive permits the derogation of certain vehicles and the UK relies on this exclusion for some vehicles such as those owned by local authorities. It is apparent that other member states have excluded other classes of vehicles, for instance Vnuk refers to some member states having specifically excluded tractors. For the CJEU's approach to use to be applied sensibly in the UK, there will need to be increased reliance on the permitted derogations. If not, consumers and businesses using vehicles solely or primarily on private land would face an increased insurance burden, which is likely to include many vehicles not currently insured at all. The policing of a requirement to insure vehicles kept and used solely on private land will create its own problems.
The CJEU interpretation of use as the “normal function” of the vehicle may be regarded as imposing a narrower interpretation than that adopted by the English courts. The concept of “normal function” is left to the interpretation of the courts of the member states but does open the way for revised thinking on the meaning of “use”.
The unambiguous exclusion of use on private land in the Road Traffic Act means that this decision will not have an immediate impact in cases currently before the courts. It is not likely to be open for a UK court to interpret s.143 of the Road Traffic act in line with this authority.
Until the Road Traffic Act is changed, the only action which a claimant could take in the UK would be against the Department for Transport, for failure to implement the Act properly, i.e. a Francovich action (an action in damages against a government for failure to implement EU law).
However, the current s.148 of the Road Traffic Act and case law regarding its interpretation is now inconsistent with EU law and will need to be amended. It is difficult to estimate how long this will take, as this will depend on political factors, whether there is more urgent legislation in the timetable, and the forthcoming General Election. We would expect that it could take a year or more for the Road Traffic Act to be amended.
It is reported that the DfT has begun planning its next steps, and that it will be holding a meeting with the ABI, the MIB and BIBA in November to discuss the required changes, in advance of a consultation expected to be launched during 2015.
The ABI’s Motor Policy Adviser, Scott Pendry, has raised as an alternative to claimants being required to pursue Francovich claims that cover in the situation seen in Vnuk could be provided by the MIB processes, though he also indicates that if this were to happen the MIB levy might need to increase depending on the number of claims involved. The possibility of this approach will presumably be considered at the meeting with the DfT in November.
In a Vnuk-type situation in the UK, the ABI point out that many current motor policies will now include cover for drivers on private land. They go on to say that though of course that will not assist for machines such as lawnmowers, tractors and quad bikes, in those cases there may be cover under existing household or liability policies.

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