The European ruling could have created extra costs of £2bn a year for the insurance sector.
A bill that would remove the European Court of Justice’s (EUCJ) ruling in the Vnuk case from UK law passed a second reading in the House of Lords late last week (18 March 2022).
Transport secretary Grant Shapps said that the move “has taken us a step closer to [removing] an EU requirement that, if implemented, would have increased motorists’ insurance premiums by c.£50 a year”.
The European Vnuk ruling from 2014 required vehicles such as e-scooters, golf buggies and ride-on lawn mowers to be insured, even on private land.
If implemented fully the judgement would have created excessive liabilities for the insurance industry to the tune of £2bn a year, based on estimations from the Government Actuary’s Department.
Brexit did not automatically allow the government to disregard the Vnuk ruling because of clauses contained within the European Union (Withdrawal) Act 2018, which imported the ruling to the UK’s domestic statute book.
As a result the UK’s compensation fund, covered by the Motor Insurers’ Bureau and funded by drivers’ motor insurance premiums, for those injured by uninsured drivers would have to pay out in circumstances covered by the Vnuk judgement.
In 2007 Damijan Vnuk was working in a hayloft in Slovenia, when a tractor and trailer reversed into the farmyard and caused him to fall.
He subsequently made a claim against the owner of the tractor for damages amounting to around £14,000, but motor insurer Zavarovalnica Triglav refused to pay the claim.
In 2014, the European Court of Justice ruled on the case in favour of Vnuk, declaring that insurance should be applicable for motor vehicles used in any area, including both public and private land.
It also defined motor vehicles as those intended for travel on land that were propelled by mechanical power, but did not run on rails, instantly widening the scope of vehicles that would require compulsory motor insurance.
Biba called for post-Brexit amendments to the Road Traffic Act in its 2022 managing risk themed manifesto launched at the beginning of the year (25 January 2022).
The trade body said that UK legislation required changes to remove “the pernicious impact of the European Union’s Vnuk motor insurance [ruling] from the UK’s domestic law”.
Biba executive director Graeme Trudgill told Insurance Times: ”We were delighted that [the bill] passed through the Commons.
“We were able to explain the impacts of the EUCJ ruling in detail when asked about it by a member of the House of Lords before a second reading of the bill on Friday.”
Biba sponsored a private members Bill in the legislature with Lord Andrew Robathan, who brought the debate to the House of Lords last week.
Robathan said that the Vnuk ruling, if retained in UK law, would incur annual costs to the Motor Insurers’ Bureau and, therefore, to “every driver in the country”.
Trudgill added that the bill’s passing was “likely to save motor insurance policyholders millions of pounds collectively”.
Baroness Charlotte Vere, the parliamentary under-secretary of state for the Department of Transport, added: “I am here as the government and so I will put our view on record.
“This is an important issue, and the government have been clear since 2014 that they do not agree with the European Court of Justice’s ruling in the Vnuk case.”
Vere added that the government supported the passage of the bill to end the UK’s legal alignment with the Vnuk decision, saying it “created an unnecessary extension of motor insurance to private land”.