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Court of Appeal rules against Motor Insurers' Bureau – industry reacts

Court of Appeal rules against Motor Insurers' Bureau – industry reacts | Insurance Business

Court of Appeal rules against Motor Insurers

Last September Mr Justice Soole of the Queen’s Bench Division of the High Court found the Motor Insurers’ Bureau (MIB) liable to compensate a claimant who suffered injuries following an incident on private land. Now the England and Wales Court of Appeal has upheld the decision.

In the UK, the MIB is a victim’s recourse in cases where the driver at fault is uninsured or untraced. Under the Road Traffic Act 1988, however, compulsory motor insurance only applies to vehicles on public terrain; unlike the European Union’s Motor Insurance Directive which spans vehicles used in traffic both on public and private roads.

Excluded from the scope of the directive are the likes of e-bikes and segways as well as vehicles intended exclusively for motorsports.  

In a statement sent to Insurance Business following the Court of Appeal’s ruling yesterday, Kennedys partner Mark Walsh (pictured) said: “The court ruled that the MIB was an emanation of the state and, as such, an EU directive requiring compulsory car insurance on both public and private land applies.

“It followed that the MIB was liable to pay the damages awarded to a claimant arising out of an uninsured defendant’s use of a motor vehicle, despite the incident occurring on private land. We can expect the MIB to move swiftly to amend its rules to ensure that it can pass on such liabilities if there is an insurer that has issued a policy on the motor vehicle involved.”

What’s interesting to note is the so-called “breakdown in the system” cited by Lord Justice Flaux in the Court of Appeal decision.

In the over 10,000-word ruling seen by Insurance Business, Lord Justice Flaux stated: “The fact that the UK government has failed to legislate for compulsory insurance in respect of the use of motor vehicles on private land and then specifically to delegate to the MIB the residual liability where the relevant vehicle is uninsured, can legitimately be described as a breakdown in the system put in place by the government.”

Meanwhile Weightmans partner David Holt believes the implication from this is what he described as a potentially significant exposure to claims which the MIB, a private body, had never contracted to be liable for.

In a post on the law firm’s website, Holt asserted: “It is surprising that EU law is said to require that only one body has to deal with all possible aspects of the guarantee fund role under Article 10 [of the directive]. If the primary objective is to protect third-party victims, why should it ultimately matter if there is more than one such body from which the claimant can seek compensation (provided the scope of each body’s remit is clear) or indeed if the government itself retains some of the compensatory role for itself?

“MIB’s argument that it was only an emanation for the purposes delegated to it, not beyond this, and that there must be some limit to what a private body agrees in respect of its role, was rejected by the court, but remains an important consideration.”

According to the Weightmans partner, the MIB is also seeking an indemnity or contribution from the government given its failure to comply with the block’s legislation.

Kennedys’ Walsh himself declared: “The Court of Appeal has made clear what most in the motor claims arena have felt was the case for some time, that the requirements of the Road Traffic Act 1998 are not compatible with the UK’s wider obligations under EU law.”