March 22
The claimant suffered very serious injuries when a vehicle in which he was a passenger was involved in a road traffic accident caused by the negligence of the vehicle’s driver. Although the vehicle was insured by the driver’s father, the policy did not provide cover for the use of the vehicle by the driver, as the claimant had known when he entered the vehicle. The insurer obtained a declaration under section 152(2) of the Road Traffic Act 1988 that it was entitled to avoid the policy for material misrepresentation in that the insured had wrongly stated that the only drivers of the vehicle would be himself and his partner. Consequently, the insurer had no obligation under section 151 of the 1988 Act to satisfy any judgment which the claimant might obtain against the driver. Instead the claimant sought compensation against the Motor Insurers’ Bureau (“the MIB”) in reliance on Parliament and Council Directive 2009/103/EC. In particular the claimant contended that as a result of the application of section 152(2) of the 1988 Act the United Kingdom had failed to take all appropriate measures to ensure that civil liability in respect of the use of vehicles was covered by insurance, in breach of its obligation under article 3 of the Directive; and that, therefore, the MIB was obliged by article 10(1) of the Directive to provide compensation for the personal injuries suffered by the claimant, being personal injuries caused by “a vehicle for which the insurance obligation provided for in article 3 [had] not been satisfied”. The MIB contended: (i) that it could not be said that the insurance obligation provided for in article 3 had not been satisfied, for the purposes of article 10(1), where the vehicle which caused the injury was insured; and (ii) that it could rely on article 10(2) of the Directive, which permitted member states to exclude the payment of compensation in respect of persons who had voluntarily entered the vehicle which caused the injury knowing that it was uninsured. Determining those two contentions as preliminary issues, the judge held that (i) for the purposes of article 10(1), the insurance obligation provided for in article 3 of the Directive was not satisfied wherever there had been a breakdown in the system established by a member state for ensuring that civil liability in respect of the use of vehicles was covered by insurance, so that where an insurer had obtained a declaration under section 152(2) of the 1988 Act that it was entitled to avoid a policy of motor insurance and thereby was relieved of its obligation under section 151 to satisfy a judgment, the MIB, as an emanation of the state and the compensation body for the purposes of article 10, had to pay compensation; and (ii) the correct test for determining whether a vehicle was “uninsured” for the purposes of article 10(2) was whether there was in existence a policy of insurance in relation to the vehicle at the time of the accident, rather than whether the use of the vehicle at the time of the accident was insured with the result that the exclusion did not apply to the present case because there had been a policy of insurance in relation to the vehicle at the time of the accident. The MIB appealed the first of those conclusions, contending that the insurance obligation provided for in article 3 had been satisfied because the insurer’s policy was in being at the time of the accident and that, accordingly, the United Kingdom had taken all appropriate measures to ensure that civil liability in respect of the use of the vehicle was covered by insurance. The MIB accepted that (a) it was an emanation of the state for these purposes and (b) that the obligation in question was directly enforceable, whatever its scope might be.
On the appeal—
Held, appeal dismissed. It was not the case that the article 3 insurance obligation was satisfied for all purposes whenever there was a policy in being. To the contrary, the consequence of avoidance ab initio was that the cover that should have been available in order to satisfy the article 3 insurance obligation was not there. As a matter of European law, where there was a policy in being, the insurer could not rely upon a clause excluding liability if the vehicle was being driven by a person who was not insured to drive it: such a clause should be held to be void as a matter of EU law and the insurer should remain liable. If a national legislature or general law permitted the insurer to avoid liability (or, by parity of reasoning, the policy) the member state was in breach of its article 3 insurance obligation because the victim would be deprived of insurance cover of which, according to EU law, he should have the benefit. There should be no gaps between the cover to be provided by insurers and the compensation body. Where the word “uninsured” was used in the Recitals to the Directive, it reflected the EU law assumption that, if a policy was in existence, the insurer would respond. If it did not do so, there was a failure by that member state to comply with its article 3 insurance obligation. Under EU law, there was a binary system where either there was a subsisting insurance policy, the continued existence and terms of which were not in question, or there was no insurance policy in being. Accordingly, if there was a policy in existence then, in order to be compliant with the Directive 2009/103/EC, it could not exclude liability for material misrepresentation. If and to the extent that it did so, it was in breach of the article 3 insurance obligation and, in the absence of an effective insurer, the compensation body should respond. Where, as in the present case, incompatible national legislation enabled the insurer to avoid its policy or liability, there was to that extent a breach of the article 3 insurance obligation because of the failure to provide the cover that should be provided in order to comply with the EU law obligation. Accordingly, the directly enforceable obligation upon the MIB was to compensate the claimant “at least up to the limits of the obligation” provided for in article 3 (paras 56, 58, 62–66, 68, 70, 72, 74, 78–80, 81, 82).
Thomas de la Mare QC and Jason Pobjoy (instructed by Weightmans LLP) for the motor insurers’ bureau, the third defendant.
Philip Moser QC and Philip Mead (instructed by Irwin Mitchell LLP) for the claimant.