Injured passengers will only be prevented from claiming statutory damages if they have wilfully closed their eyes to their driver's lack of insurance, reports Cathryn Whibley….

In the House of Lords, it was decided recently that passengers hurt in uninsured car accidents – where their driver caused the crash – can still claim compensation from the Motor Insurance Bureau (MIB) if they were simply careless or negligent as to whether their driver was insured.

This ruling in White vs White and MIB followed from the court's interpretation of the Uninsured Drivers Agreement (UDA) 1988 to conform with the second EC directive on Motor Insurance dated December 30, 1983.

The relevant clause was 6 (1) (e) (ii), which provides an exception to the MIB's obligations where the injured passenger “knew or ought to have known” the vehicle was not insured. The question was the meaning of the words “ought to have known”.

Article 1 of the directive requires each member country to provide for compulsory motor insurance, covering liabilities to third parties, and to establish a body to provide compensation in respect of uninsured and unidentified vehicles.

There are limited permitted exclusions, including the following: “Member states may exclude the payment of compensation by that body in respect of persons who voluntarily entered the vehicle which caused the damage or injury when the body can prove that they knew it was uninsured.”

In the White case, the claimant had been injured when he was in the front seat passenger of a car driven by his brother, who was uninsured. The claimant did not know that his brother was uninsured at the time of the accident, but he had known that his brother had been uninsured in the past.

It was agreed that the MIB was not an arm of the state; it had made a private contract with the government and had merely to operate within the terms of this agreement. Therefore the EC directive gave the claimant no direct, actionable rights against the MIB. (The court thought that if this private agreement with the MIB did not comply with European law, that was a matter for the government.)

Lord Nicholls, however, considered it unnecessary to decide this point and held that, in the light of an objective approach and the principle of European compatibility, “knew or ought to have known” should not be interpreted as extending beyond actual knowledge or “wilful blindness” to the facts.

It was held that this ought not to include the honest but careless person, but was to include the case of a passenger who deliberately refrained from asking questions to avoid acquiring the relevant knowledge, namely a person who closed their eyes to the obvious.

A high degree of personal fault had to exist before the injured passenger should be deprived of rightful compensation. The exception in the MIB agreement did not therefore bite in White.

Although, therefore, the MIB might celebrate that the wording “ought to have known” has not been outlawed and constructive knowledge is still possible, there will now be few cases where constructive knowledge can be established to defeat a claim. This may include cases where the passenger knows the driver is currently unlicensed or disqualified from driving.

This decision not only affects the MIB, but also those insurers who find themselves liable to deal with a claim pursuant to the Road Traffic Act (RTA) 1988 or other domestic regulations.

It is not clear whether the White decision will affect the situation where the passenger knew or ought to have known (as per the EC directive) or had reason to believe (as per the RTA) that the vehicle had been stolen or unlawfully taken. This will rest on the interpretation of an exception at clause 6 (1) (e) (i) or the interpretation of RTA section 151(4), which will have to wait for another case.

  • Cathryn Whibley is an associate at Weightmans Solicitors.


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