The document discusses the implications of the recent Vnuk ruling on motor insurance in the UK. It summarizes that the ruling found that the EU Motor Insurance Directive requires insurance to cover any use of a vehicle consistent with its normal function, including on private land. This extends beyond the UK law which only requires insurance for use on roads. It may invalidate parts of the UK Road Traffic Act and impact existing insurance policies and coverage. Stakeholders are looking to the European Commission to clarify or amend the directive given the significant changes caused by extending mandatory insurance beyond public roads.

1. The future of motor insurance
April 2016, London

2. Motor Insurance
Vnuk & other recent Developments
John McDonald
2 Temple Gardens
For Browne Jacobson

3. How may two motor insurers become
involved in the same claim?
• Insurers of 2 drivers each jointly liable
• Insurer of vehicle and DOV insurer of driver
• Driver forgets to cancel automatically renewing
policy
• Driver of hire car where insured on his own policy
and on owner’s fleet policy

4. How may insurers become obliged to
pay for third party RTA risks?
• By contract
• By section 151 RTA
• Article 75
• Under the MIB Uninsured Drivers Agreement

5. Section 152 Declaration
• A Declaration that insurer entitled to avoid the
policy on the grounds that it was obtained by a
material non-disclosure or misrepresentation
• Proceedings for Declaration must be commenced
no later than 3 months after the Claimant’s
proceedings have been commenced

6. Requirements for section 152
Declaration
• Non-disclosure or misrepresentation
• Material
• Inducement

7. Who can join in the Declaration
proceedings?
• The victim if he has commenced proceedings
• Zurich v. Livingston 1938 SC 582
• Sabre Insurance v. Jones & EUI (2013)
• Equity Red Star v. Meppen-Walter & Quinn (2013)
• Preserve v. Chikuza & Allianz (2014)
• CIS v. Ensor & EUI (2016)

8. Cancellation
• Deregulation Act 2015
• Amends section 152(1)(c)
• Now much easier to have an effective cancellation
of the policy
• If grounds for doing so before accident, well
advised to take this route

9. Double insurance
• May recover entire loss from any one insurer
• Insured may not recover more than his loss
• Each insurer bound to contribute rateably
• If insurer pays more than share, entitled to claim
contribution from other insurer(s)

10. Contribution
• Calculation
• Rateable proportion clauses
• Escape clauses
• Excess clauses
• Date at which contribution claim to be assessed

11. Understanding Vnuk
• The background
• English law
• EU law
• Consequences
• Reform?

12. Section 143 RTA
• This section imposes the duty to be covered by
insurance.
• “A person must not use a motor vehicle on a road
or other public place unless there is in force in
relation to the use of the vehicle by that person
such a policy of insurance as complies with ... this
Act.”

13. Section 145 RTA
• This section says what the insurance policy must
cover in order to comply with Act.
• It “must insure such persons or classes of persons
as may be specified in the policy in respect of any
liability ... In respect of the death of or bodily
injury to any person or damage to property caused
by, or arising out of, the use of the vehicle on a
road or other public place ...”

14. Road or other public place
• Sections 143 & 145 originally only referred to
requirement for insurance on a “road”
• Cutter v. Eagle Star/Clarke v. Kato [1998] 4 All ER
417: Private car park cases
• Motor Vehicles (Compulsory Insurance) Regulations
2000 inserted “or other public place” after “road”
• Still no mention of private land in English law

15. First Motor Insurance Directive
• 72/166/EEC
• See now Directive 2009/103/EC
• Article 3(1):
“Each Member State shall, subject to Article 4, take
all appropriate measures to ensure that civil liability
in respect of the use of vehicles normally based in its
territory is covered by insurance.”
“

16. “Vehicle”
• Article 1 of First Motor Insurance Directive:
• “Vehicle” means any motor vehicle intended for
travel on land and propelled by mechanical power,
but not running on rails, and any trailer, whether
or not coupled.”
• Cf RTA Definition of “motor vehicle”: “ ... a
mechanically propelled vehicle intended or
adapted for use on roads.”

17. Vnuk v. Zararovalnica Triglav DD
[2015] Ll. Rep. IR 142
• Article 3(1) “must be interpreted as meaning that
the concept of ‘use of vehicles’ in that article
covers any use of a vehicle that is consistent with
the normal function of that vehicle. That concept
may therefore cover the manoeuvre of a tractor in
the courtyard of a farm in order to bring the trailer
attached to that tractor into a barn ...”

18. Nature of the use
• Meaning of the phrase “use of vehicles” is a matter
of EU not domestic law
• What is “the normal function”?
• This is a matter for the national court
• Numerous examples, including Dunthorne v.
Bentley [1996] RTR 428

19. Caused by or arising out of the
use
• This is the issue under section 145.
• Examples include:
• Clarke v. Clarke & MIB [2012] 2118
• AXN v. Worboys [2012] EWHC 1730

20. Location of the use
• Is “use” limited in the Directive to public roads?
• ECJ in Vnuk did not make any specific ruling on
whether ambit of directive limited to roads
• Context of case was use of vehicle not on a road
• Advocate General’s Opinion specifically stated it
should not be limited to roads.

21. Consequences of Vnuk: “use”
• No difficulty in reading the Vnuk definition of
“use” into the RTA
• UK Insurance v. Holden [2016] EWHC 264: “use”
suggests some activity performed by the vehicle as
vehicle, so when being repaired not being used.
• Sahin v. Havard (Court of Appeal, Nov. 2016)

22. Consequences of Vnuk: “land”
• RTA probably incompatible with EU law
• Could mean that use of any vehicle on private land
must be insured.
• Would have significant consequences for farmers,
landowners and motor sports

23. Consequences of Vnuk:
“vehicles”
• Probably means that definition of vehicle in RTA
incompatible with EU law
• Would require motor insurance – even on private
land – for ride-on lawnmowers, Segways, golf
buggies, etc.

24. Legal effect of Vnuk
• EC Motor Insurance Directive has no “horizontal”
direct effect
• May have “vertical” direct effect against an
“emanation of the State”
• Difficult to construe RTA so as to include use
anywhere on land.
• Limits of the Marleasing principle
• Francovich action: Delaney v. Secretary of State
[2015] EWCA Civ 172

25. What does policy in fact cover?
• Section 145 is a “neutral provision”: Bristol Alliance v.
Williams [2012] EWCA Civ 1267
• Doesn’t require user to take out policy complying with
the RTA
• Doesn’t require insurer to issue policy complying with
the RTA
• Hence limitations of (a) location and (b) type of use in
most motor policies
• But no implicit limitation in policy to cover required by
the RTA

26. Effect of Vnuk on existing
policies
• Vehicle: Only vehicle(s) actually insured will be
covered
• DOV extension: Will only apply to class of vehicles
referred to
• Use: May extend scope of “use”
• Use exclusions (eg racing) remain valid
• Land: Will not make policy apply to private land
unless it already does so.

27. What next after Vnuk?
• Derogation and the MIB
• Insurance requirement under section 143 RTA
unenforceable
• Disputes between EL/PL insurers and motor
insurers
• Pressure to rewrite motor policy wordings
• Reform? Pressure on European Commission to
amend wording of Directive