One Way

It was back in 1972 that the first European Directive against civil liability in respect to motor vehicles was enforced. Since then it has been amended three times.

The aim of the various Directives is to establish a single market for motor insurance so all motor vehicles in the EC are covered by insurance against third party liability. It also stipulates that a certificate of insurance is valid generally throughout the community; that member states set up compensation bodies to compensate victims of accidents caused by uninsured or unidentified drivers (such as the Motor Insurers' Bureau in the UK); and for all passengers in the vehicle to be covered by compulsory insurance.

The Fourth Directive plugged a gap in providing that victims who were injured in an accident outside their home country were covered and that efficient mechanisms were in place for the settlement of such claims.

Now the Fifth Directive has been proposed after a large number of questions and complaints, mainly arising out of the four existing Directives, were levied by the industry. The Fifth Directive is intended to improve the protection of victims, fill gaps in and clarify the previous Directives and solve problems that have frequently arisen.

But what are revisions, and how will they affect insurers and brokers? Below are some of the more pertinent points:

Efficient settlement of claims
The system introduced for the efficient settlement of claims of victims injured within a member state other than their state of residence will apply to all victims. This will include a provision that insurers must either make a reasoned offer of settlement where liability is not in dispute within three months of a claim being made or a reasoned reply where liability is contested. To make this workable and to facilitate the efficient settlement of claims a victim will have a direct right of action against insurers.

Registration plates
The territory in which the vehicle is normally based for the purposes of these Directives is taken as the member state of which the vehicle bears a registration plate. The proposals will clarify that this includes both permanent and fixed registration plates. In cases where a vehicle bears no registration plate or the registration plate is forged, the territory in which the vehicle is normally based will be the member state where the accident occurred.

Checks on insurance
Insurance checks on vehicles passing between member states were abolished under the 1972 Directive, although random checks are permitted. The proposals will clarify that such checks may be justified where a vehicle has been involved in an accident or other mishap, but it is intended that the controls are non-systematic, non-discriminatory and not aimed at insurance verification. No obligation to insure certain vehicles

The First Directive in 1972 allowed member states to remove certain vehicles from the compulsory insurance obligations provided that the member state guaranteed that compensation would be paid in respect of accidents in another member state involving that vehicle. The First Directive also provided that a member state could exclude from compulsory insurance certain types of vehicle. While the first of these provisions is to remain effective, the second is to be abolished under the proposals.

Minimum amount of cover
The minimum amount of cover under the proposals is to be increased to €1m (£631,000) per victim for personal injuries and €500,000 (£315,000) per claim for damage to property. Damage claims where vehicle unidentified

Member states under the 1984 Directive have discretion to limit or exclude the compensation payable by the appropriate body (Motor Insurers' Bureau in the UK) for damage to property caused by an unidentified (untraced) vehicle on account of the risk of fraud.

Under the new proposals it is considered that the risk of fraud is minimal where the victim has also suffered significant personal injuries, presumably on the basis that the victim is unlikely to have caused himself injury in the absence of an accident andthe discretion is therefore removed where significant personal injury and the property damage arise from the same accident.

Service representatives
Current regulations require insurers to appoint representatives to collect information in relation to claims. Under the proposals the representative may also be responsible for handling and settling claims.

Passengers
Since 1972 it has been compulsory to provide insurance cover for all passengers in the vehicle, although some member states have excluded such cover where the passenger knew or ought to have known that the driver was under the influence of alcohol or drugs. It is intended to clarify that such a restriction is not valid under the new proposals.

Pedestrians and cyclists
Insofar as it relates to the UK, this is the most radical of the proposed changes. It is intended that pedestrians and cyclists will be covered for personal injuries suffered in an accident with a vehicle under the compulsory insurance of the vehicle involved, irrespective of whether the driver of the vehicle was at fault.

While at first glance this may seem to be opening the door to a host of claims against innocent drivers, the proposals make it clear that such compulsory insurance does not determine the civil liability of the pedestrian or cyclist or the level of damages.

They are to be determined by the national courts.

Accordingly any contributory negligence on the part of the pedestrian or cyclist will ultimately be taken into account when the level of compensation is decided. Temporary stays in other member states

The new proposals intend to clarify that an insurance policy issued in one member state will be valid throughout the full term irrespective of the duration of the vehicle remaining temporarily in another member state.

Imported vehicles
The proposals will provide for the member state to which a vehicle is imported to be considered as the "territory in which the vehicle is normally based" pending re-registration to simplify the obtaining of insurance during that period.

Excesses

Save in exceptional cases provided for, any insurance excess will not be enforced against the injured party under the proposals.

In summary, as member states continue on the road to legislative harmony, the EC seeks, through Directives such as these, to create a truly united Europe in which cross-border driving becomes simply an extended journey for those travelling from within the UK.

Whether the Fifth Directive heralds the beginning of an end to our current tort-based compensation system is another matter.