The Motor Insurance Directive 209/103/EC (the Directive) sets out the minimum level of compulsory motor insurance required to protect the victims of motor vehicle accidents throughout the EU. The Directive sets out requirements for a minimum level of third party insurance and for a fund of last resort which provides a compensation fund to cover motor accident victims in situations where an insurer cannot be identified (e.g. in hit and run accidents).
In the UK the requirements of the Directive are implemented in the Road Traffic Act 1988 (RTA). However the RTA limits the need for compulsory motor insurance to motor vehicles intended or adapted for use on roads and which are used on a road or other public place.
In case called Vnuk the European Court of Justice (the ECJ) interpreted the Directive in a new, broad and definitive way. In Vnuk the ECJ ruled that so long as a vehicle is used in such a way that is consistent with its normal function a requirement for compulsory motor insurance exists. The implication of this decision is that no distinction can be made between use on the road, other public places or on private land and that as long as a vehicle is used in a manner consistent with its normal function a requirement for compulsory motor insurance exists.
The decision of the ECJ in Vnuk means that the UK requirements for compulsory motor insurance as set out in the RTA are no longer compliant with the Directive and need to be revised. This is because:
- The RTA definition of vehicles is narrower than the definition in the Directive. In the RTA definition vehicles means motor vehicles intended or adapted to be used on a road or other public place. The definition in the Directive is wider and includes any motor vehicle intended for travel on land and propelled by mechanical power, but not running on rails. This means that a wider range of vehicles ae required to be brought into scope in UK law such as:
- Unusual vehicles which travel on road e.g. mobility scooters, Segways, electric bikes
- Vehicles not designed for on road use e.g. motor sport vehicles
- Vehicles originally intended for road use but which are no longer used on road e.g. show cars, SORN vehicles
- Specialist trade vehicles e.g. agricultural vehicles, forklifts, construction plant
- A distinction in respect of a requirement for compulsory motor insurance cannot be made based on location. This is because it follows from the decision in Vnuk that the requirement for compulsory motor insurance under the Directive exists as along as a vehicle is used in a way consistent with its normal function regardless of whether that use takes place on the road, a public place or on private land.
The UK and other EU members argued that the decision in Vnuk widened the scope of the Directive too much by:
- Bringing into scope vehicles (such as mobility scooters) for which a need for compulsory motor insurance has not previously been required.
- Inflicting detrimental effect son industries whose activities take place off road such as agriculture and motor sport.
The EU Commission has recognised that the effects of Vnuk and the extension of the requirement for compulsory motor insurance could have detrimental effects and has indicated a willingness to review the Directive. The Commission has published an Impact Assessment setting out four possible options:
- Do nothing and implement the Vnuk judgment in full. This means that compulsory insurance would be required for all vehicles used in a way consistent with their normal function regardless of where the vehicles are used.
- Legislate at EU level to set up compensation funds for activities that are currently not insured but could now be in scope of the Directive. This could involve the EU interfering in matters which many states would feel that they are best placed to deal with under the subsidiarity principle.
- Change the Directive so that vehicles used only in traffic are in scope and exclude activities which take place on private land to which the public has no access. This is termed the “amended directive option” by the UK government
- Exclude certain types of vehicle from the requirements of the directive. Although certain vehicles could be excluded from scope there is a requirement that any victims of accidents of excluded vehicles have the ability to claim against a fund of last resort. Funds of last resort are funded by a levy on all other policy holders. Therefore excluding certain vehicles could impose an unfair burden on others.
Obligations on the UK under EU law
The UK has voted to leave the EU but whilst the UK remains a member of the EU it is obliged to implement EU legislation. This means that following the Vnuk decision there is a need to amend UK law to make it consistent with EU law.
The Government’s preferred option to resolve the inconsistency between UK and EU law created by Vnuk is to adopt the Commission’s amended directive proposal so that the scope of the Directive would apply only to motor vehicles in the context of traffic.
The Government has published a consultation on possible changes to the RTA in light of the Vnuk case.
A copy of the consultation document can be found here:
Our initial thoughts are that:
- The RTA as it currently stands gives adequate protection to victims of motor accidents that occur on road and other public places
- Employers and public liability insurance offer a route for compensation to victims of accidents that occur off road on farm
- Changes to insurance requirements in light of Vnuk could result in increased insurance premiums for motorists and other policy holders
- Given that there is a requirement to amend UK law to make it compliant with EU law the amended directive option appears to be one which will have the last impact in terms of cost and administrative burden.
- It may be appropriate to include a sunset clause in any amended legislation or review the legislation once the UK has left the EU.
We want to hear from you and your views on:
- Whether the response to the Vnuk judgment should be:
- To should be to widen the scope of compulsory motor insurance in the UK in line with the Vnuk judgement to cover all vehicles used anywhere? Or
- Amend the RTA to cover vehicles used in traffic in line with the amended directive proposal?
- Whether any changes to UK compulsory motor insurance requirements should be subject to a sunset clause or review after the exit from the EU is completed?
- The impact that any change could have on your business activities.
Please respond by mailing us, here, no later than 28 February 2017.
The ECJ judgment in the case of Vnuk is available here:
The EU Commission Impact assessment is available here: