Ruling could have major implications for claims costs

A court of appeal ruling against the Motor Insurers’ Bureau leaves it potentially significantly exposed to claims it had previously not been liable for.

The ruling relates to an accident that took place in June 2013 when the claimant, Michael Lewis, was hit by uninsured driver Dennis Tinsdale while walking on private land in Lincolnshire. Tinsdale drove into Lewis mistakenly believing he was ‘up to no good’, causing serious bodily injury.

A 2017 ruling in the MIB’s favour contended that it had no contingent liability to the claimant as an uninsured driver because the accident and injuries ‘were not caused by or arising out of the use of the vehicle on a road or other public place under section 145 of the Road Traffic Act 1988’. It cited a 2014 EU Court of Justice ruling as precedent, known as the ’Vnuk’ case.

But Thursday’s ruling overturned the original decision, finding in favour of the claimant Lewis, meaning the MIB is liable to pay out compensation for accidents on private land as well as public. This in turn could see increased costs of motor insurance for the public and is a hugely significant development for the insurance industry, according to the law firm representing the MIB, Weightmans.

’EU law Not compatible with UK’

Mark Walsh, partner at Kennedys, said: “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.

“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.”

Politically awkward

Alistair Kinley, director of policy and government affairs at insurance risk and commercial law firm BLM, commented: “It’s clear that certain aspects of our motor insurance law are, following the Vnuk decision of the Court of Justice of the EU in 2014, out of step with the European Directive. As that is politically awkward - because of the obvious unattractiveness to the Government of amending the law to harmonise it with Europe - nothing has been done for five years.

“While that’s hardly ideal, it might have been fair enough if the government paid claims which fall in the gaps between our law and the European standard. But the Court of Appeal today [Thursday] was very clearly bound, by another more recent CJEU case, to conclude liability for those claims should fall on the MIB, with the Government not being directly involved at the appeal stage.

“The real problem here is not so much where this liability actually sits, as the fact that it is simply not something that the MIB is currently funded to meet. So meeting these sort of claims in the future - if the decision today stands - would amount to a new cost for motor insurers and the premium-paying public and something for which it is very difficult to estimate the likely aggregate cost.

“The prospect of a further appeal in this case and, ultimately, a renegotiation of the insurance industry’s agreements with Government relating to the scope of the MIB’s functions and roles are foreseeable courses in the short and longer terms respectively.”

The MIB is planning to appeal the case in the Supreme Court, Weightmans said.