The Law of Compulsory Motor Vehicle Insurance

Özlem Gürses

• Publisher: Informa Law from Routledge
• Year: 2019
• ISBN:
  9781317662310
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

The Law of Compulsory Motor Vehicle Insurance covers motor vehicle compulsory liability insurance in a broad context by putting emphasis on the fundamental principles unique to this type of insurance, their operation together with the general principles of law, and the interventions of the relevant EU Directives and CJEU decisions.

The law regarding motor vehicle liability insurance is ever-evolving, fast-developing and offering more intellectual challenges as the disputes vary every day. This book examines the principles applicable in this area of law by studying the grounds where the rules derive from and their continuing developments over decades at both domestic and EU levels. Whilst doing so it also discusses whether the sources of the current applicable law, in several different motor vehicle compulsory insurance related issues, are in line with each other. The book also presents careful analyses of the interplay between the different sources of law, detailed discussions on what the law should be in order to provide consistency amongst the rules and principles identified, and how solutions to newly emerging issues can be found.

The regime applicable in this area is overcomplex. This book will be valuable reading for any lawyer, whether academic, practitioner or student who would like to understand the insurance cover required for compulsory motor vehicle third party liability insurance together with the rationale for adopting such rules and their interpretation by the Courts.

Chapter 1
Brief history of the insurance obligation and interaction with the EU law

Introduction

1.1 Motor vehicle insurance is a type of compulsory insurance the absence of which renders the use of a motor vehicle a criminal offence under the Road Traffic Act 1988.¹ The rules that govern the compulsory liability insurance for motor vehicle accidents (Motor Third Party Liability (MTPL)) do not derive from the domestic legislation or the common law court cases only. The Directives of the European Union² aiming to harmonise the rules applicable to insurance of civil liability with respect to motor vehicle accidents also influence the interpretation of such rules considerably. Therefore, the sources of the principles applicable to insurance of civil liability for motor vehicle accidents may be summarised mainly as the domestic statutory provisions, the relevant EU Directives, the common law court cases interpreting the domestic provisions and the decision of the Court of Justice of the European Union (CJEU) interpreting the relevant EU Directives.

1 RTA 1988 s 143(2).

2 They will be referred to as “relevant Directives” throughout the book. A detailed description of the scope of each related Directive will be provided further in this chapter.

1.2 The starting point to analyse the scope of the compulsory liability insurance for motor vehicle accidents is to determine the meaning of “use” as this phrase unlocks the key for the compulsory insurance requirement. However, before exploring the meaning of this term a brief history of compulsory motor vehicle liability insurance will be provided.

History (domestic law)

1.3 Insurances were offered in the nineteenth century for “indemnifying the owners of horses and vehicles against their Common Law liability for accidents arising through the negligence of their drivers.”³ The policies had been initially domestic, but with the growth of the commercial use of vehicles the first commercial policy was observed in 1901.⁴ From 1903 onwards car users increased rapidly which led to a proportionate rise in motor vehicle accidents between 1912 and 1928.⁵ In the 1920s the life of a car was estimated as four–five years.⁶ At those times the premiums were assessed on a per capita basis with regard given to the number of drivers employed and the amount of indemnity required for any one accident.⁷ Two different types of cover were available.⁸ First, insuring third party risks only, ie covering the assured’s liability for personal injury and damage to property of the public. Second, in addition to the third party liability, it was possible to purchase insurance for damage to the assured’s own vehicles and harness and fatal injury to his horses. In South Staffordshire Tramways Co Ltd v Sickness & Accident Assurance Association Ltd⁹ a tramcar was insured for “claims for personal injury in respect of accidents caused by vehicles for twelve calendar months from 24 November 1887,” to the amount of “£250 in respect of any one accident.” When the insured tramcar was overturned as a result of which 40 passengers were injured, the word “accident” was interpreted by the Court as meaning “in respect of any single injury to person or property accidentally caused.”

3 J. Alfred Eke, The Principles of Insurance and Their Application, 1926, London, p 66.

4 R.M. Merkin/M. Hemsworth, The Law of Motor Insurance, 2nd ed, 2015, Sweet & Maxwell [1–11].

5 Eke, The Principles of Insurance and Their Application, 1926, London, p 71–72. Whilst the number fatal accidents were 390 in 1912, the number went up to 768 in 1928.

6 Edney v De Rougemont (1927) 28 Ll L Rep 215.

7 Eke, p 67.

8 Eke, p 67.

9 [1891] 1 QB 402.

1.4 The policies excepted from the cover for instance damage to any viaduct, bridge, road or anything beneath, by the weight of the vehicle; earthquake, war, riot or civil commotion; wear and tear, depreciation, mechanical fracture, and/or breakdown of any part of the vehicle unless caused by external impact and loss arising out of the explosion of the boiler of the vehicle.¹⁰ Personal injury claims by passengers in the vehicle was excluded unless specifically provided for and an additional premium paid to cover the risks.¹¹

10 Eke, p 77. For more information about exclusion clauses observed in the motor vehicle policies issued before the RTA 1930 see Merkin/Hemsworth, [1–12].

11 Eke, p 77.

1.5 On the other hand, the increasing number of victims of automobile accidents had created social problems.¹² Traffic on the highways was regulated by the out-dated Highways Act 1896 and the Motor Car Act 1903. It had become apparent that people who were injured by the negligent driving of motor cars were in a parlous situation if the negligent person was unable to pay damages. As a result, the injured party was deprived of appropriate compensation.¹³

12 For some detailed statistical information as to the number of registered vehicles, accidents and victims involved in those accidents in the early twentieth century see E. D. Weiss, “Legislation and Road Accidents,” 2 Mod. L. Rev. 139 (1938); see also P. Bartrip, “No-Fault Compensation on the Roads in Twentieth Century Britain,” 69 Cambridge L.J. 263 (2010), p 264–265.

13 Carswell v Secretary of State for Transport [2011] Lloyd’s Rep IR 644, [7].

1.6 In 1928, a Royal Commission was appointed to examine the whole problem of transportation. First Report of the Royal Commission on Transport (“The Control of Traffic on Roads”)¹⁴ emphasised the urgency of the need for legislative steps to regulate this area of law.¹⁵ On the basis of recommendations which the Commission embodied in its first report, after a careful survey, the government proposed a Bill which became the Road Traffic Act 1930 (RTA 1930). This Act imposed, for the first time, a statutory obligation on the users of all motor vehicles to provide security against their legal liability for the death of or bodily injury caused to third parties. The Road Traffic Act 1930 received Royal Assent on 1 August 1930. The Act was a comprehensive statute providing for (a) the regulation of motor vehicles and traffic on roads (eg by classification of automobiles, licensing of drivers, driving offences and penalties etc); (b) the protection of third parties against risks arising out of the use of automobiles; (c) amending the highway laws; and (d) the grant of power to local authorities to regulate public service vehicles.

14 19 July 1929. Cmd. 3365, p 3.

15 F. Deak, “Compulsory Liability Insurance under the British Road Traffic Acts of 1930 and 1934,” 3 Law & Contemp. Probs. 565 (1936), p 566.

1.7 The RTA 1930 was then amended by the Road Traffic Act 1934, and then the relevant legislation was amended by the Consolidation Acts of 1960 and 1971 and 1988. Currently the Road Traffic Act 1988 (RTA 1988) is in force and governs the compulsory insurance requirement in its Part VI.¹⁶

16 For an overview of the compulsory motor third party liability insurance see J. Davey, “A Compulsory Diet of Chicken and Eggs: The EU Motor Insurance Directives as a Shadow Tort Regime,” Research Handbook on EU Tort Law, Ed. by P. Giliker, 2017, p 239–244.

Third Parties (Rights Against Insurers) Act 1930

1.8 The RTA 1930 was supplemented by the Third Parties (Rights Against Insurers) Act 1930 (TPA 1930). Prior to the adoption of the TPA 1930 it was held by the Courts that a third party victim had no right of direct action against the insurer in the case of the assured becoming bankrupt or insolvent or the case of a winding up order being issued.¹⁷ As a result, the insurance indemnity had to be part of the insolvent assured’s asset from which the victim had to try to recover his loss. Consequently, if the assured had a claim against the insurers, the payment by the insurer under the insurance contract was to be made to the liquidators and the third party victim would claim it as pari passu with the other creditors. The injustice of this rule had been acknowledged by the Court of Appeal in Re Harrington Motor Co Ltd Ex p. Chaplin,¹⁸ in which a taxicab belonging to the assured company knocked down the victim pedestrian by the negligence of a driver of one of its cabs. The victim recovered judgment against the company for £324. The judgment was given on 28 January 1927, and on 15 February an order was made for its compulsory winding up. At the time of the accident the company had a third party liability insurance under which the insurer paid to the liquidator on 14 April 19...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• CONTENTS
• DETAILED CONTENTS
• Preface
• Table of cases
• Table of EU legislation
• Table of UK Statutes
• Table of UK statutory instruments
• CHAPTER 1 BRIEF HISTORY OF THE INSURANCE OBLIGATION AND INTERACTION WITH THE EU LAW
• CHAPTER 2 THE INSURANCE OBLIGATION: OVERVIEW
• CHAPTER 3 INSURANCE OBLIGATION: SCOPE (MEANING OF “PERMIT,” “CAUSE,” “MOTOR VEHICLE,” “ROAD OR OTHER PUBLIC PLACE”)
• CHAPTER 4 REQUIREMENTS WITH RESPECT TO THE INSURANCE POLICY: FORM AND SCOPE
• CHAPTER 5 THE MEANING OF “USE” OF A VEHICLE
• CHAPTER 6 CIVIL LIABILITY
• CHAPTER 7 CONTROL OF POLICY TERMS
• CHAPTER 8 THIRD PARTY VICTIM’S RIGHT OF DIRECT ACTION AGAINST INSURERS
• CHAPTER 9 CREDIT HIRE AGREEMENTS
• CHAPTER 10 MOTOR INSURERS’ BUREAU
• CHAPTER 11 INJURIES SUFFERED IN THE EU
• CHAPTER 12 THE PUBLIC POLICY DOCTRINE
• CHAPTER 13 INSURANCE OF AUTOMATED VEHICLES
• Index