Third party cover in motor policies has wide-ranging legal implications. Roy Rodger explains
In an earlier article we looked at the implications of compulsory motor insurance cover. This article looks at cover provided by the third party section of the usual private car policy.
The cover is in respect of legal liability only. In other words, the victim of the accident has to prove that the driver was negligent or otherwise to blame for the accident. The victim does not have an automatic right to compensation simply because he has been injured or has had his property damaged by a motorist.
It operates in respect of an accident involving the car. This usually means a collision, but it has been held to apply in a case where a driver had left the car, to find assistance after running out of petrol. She was hit by a car she was trying to flag down and it was held that the accident arose out of her use of the car. (Dunthorne v Bentley & others 1996).
Under private car and motorcycle policies, there is no limit on what the policy will pay for injury and property damage (remember the law prescribes £250,000 for property damage, but injury must be unlimited).
Commercial vehicle policies usually limit third party property damage to £1m or £5m.
The policy goes wider than the legal requirement (on a road or any public place) and covers the driver anywhere in Great Britain (England, Scotland and Wales), Northern Ireland, Channel Islands, Isle of Man and, in some policies, The Republic of Ireland. Therefore, the accident can happen on factory premises, a building site, or on a private estate and the same cover applies as if the car was on the road.
Since becoming members of the EU our motor policies have to be `pan-European'. This means that a motor policy issued in UK must cover the driver in many other European countries, not just in EU countries.
The cover is not particularly useful as it is only the greater of our own Road Traffic Act (RTA) cover or the equivalent RTA cover in the country being visited.
It is not just the policyholder who is covered by the policy. Any person who is permitted to drive by the certificate is covered if he causes an accident and the victim makes a claim against him.
If a passenger in the car causes an accident, for example by opening the car door and hitting a cyclist, the policy would cover the passenger's liability to the cyclist.
Who is driving?
It is possible for a person to use a car without driving it. For example, you ask me to drive you to the cinema because your car won't start - you are using the car, although I am driving it. If the victim chose to claim against you as the user, then the policy would cover you. I have noticed that many policy wordings are incorrect in that the policy restricts this to social domestic and pleasure (SDP), but the certificate gives business use to the policyholder and spouse. `Use' raises many issues and we will look at it separately in a future article.
In the same way, if you are driving your car on business, a victim may claim against your employer instead of you, and the policy would cover your employer. This would only happen where your policy covered business use.
If the policyholder were to die while a claim against him was outstanding, the insurers would continue to deal with the claim through the late policyholder's legal representatives, and the insurers would continue to cover the car until the estate was wound up.
Under the third party section, where there is an accident and there is a third party involved, the insurers will pay for the driver's defence if he is charged with a motoring offence. This is to ensure the driver is properly advised and does not say anything in court that might prejudice the insurer's dealings with the third party. Insurers will split this cover between offences dealt with by magistrates, and cases dealt with in higher courts. Usually they will only pay the costs in the higher court if the driver has been charged with manslaughter (culpable homicide in Scotland) or causing death by dangerous driving or causing death by dangerous driving while under the influence of drink or drugs.
For the higher court, the insurers may put a limit on the amount they will pay, for example £50,000. In addition, the insurers will pay the costs of dealing with the third party claim, such as litigation costs and expenses.
Under s158 of the 1988 Road Traffic Act, the driver is liable to pay the costs of medical treatment of a casualty at the scene of the accident. These fees are payable irrespective of whether the driver was at fault or not, and if this is the only payment, no claims discount (NCD) is not affected.
Unlike emergency treatment fees, hospital charges are only payable if the driver was responsible for the accident and compensation is paid to the victim (s157).
In order to succeed in a claim for compensation, a victim has to:
a. Prove that there was an accident
b. Demonstrate the driver was to blame
c. Produce medical evidence to support his injuries
d. Make his claim within 30 days of the accident
The cover provided by the policy is restricted to:
a. Great Britain
b. United Kingdom
c. Northern Ireland
d. Great Britain, Northern Ireland, the Republic of Ireland, Channel Islands, Isle of Man
When the car is in, say, France, what cover is provided by the policy?
a. Third party
c. The greater of French "RTA" and UK's RTA cover
d. No cover at all
When would the insurers pay for a driver's defence costs?
a. After any accident
b. Only where the driver was injured
c. Only where another party is involved
d. If the charge can be heard in a magistrate's court
The CPD page is edited by RW Associates, specialists in training, competence and compliance.
How to use CPD
This free Insurance Times reader service is intended to help you improve your skills and understanding from the comfort of your office or home. All you have to do is read the text and answer the multiple-choice questions. The answers will appear in next week's issue.
Why CPD is important
The Financial Services National Training Organisation (FSNTO)'s mission is to improve the quality and skills of the workforce as a fundamental requirement for the sustainable competitiveness of the industry. We fully support the practice of continuing professional development (CPD) as a major contributor to achieving this aim. Many people across the sector are required to undertake CPD by virtue of the work they do or the professional body to which they belong, but everyone can benefit from continuing to develop their knowledge and skills.