PI Brief Update

Uninsured Drivers' Agreement 2015 - Andrew Baker, Horwich Farrelly Solicitors

07/03/16. On 3rd July 2015 the government and the MIB entered into a new Uninsured Drivers’ Agreement (“the 2015 Agreement”) which followed a previous consultation on updating both the 1999 Agreement (and also changes to the 2003 Untraced Drivers’ Agreement). The 2015 Agreement will apply to any incident applying on or after 1st August 2015 (see Clause 2(1)). The 1999 Agreement (in conjunction with the Supplemental Agreements) will continue to apply to incidents from 1st October 1999 to 31st July 2015. Those Supplemental Agreements have been incorporated within the new Agreement as required including in particular the £1 million property damage limit.

There were a great many criticisms of the conditions precedent to liability under the 1999 Agreement, particularly in relation to the notice provisions required around issue and service of proceedings, particularly amongst claimant lawyers. Matters were partially eased by the MIB publishing the Supplemental Guidance Notes effective from 15th April 2002, albeit the 1999 Agreement itself remained unaltered. Practitioners should rightly welcome the much simplified procedure set out in Clause 13(1) which requires the MIB to simply be joined as a party to the relevant proceedings from the outset as has long been held to be their right (see Gurtner v. Circuit and the MIB [1968] 2 QB 587).

Clause 13(2) sets out that the requirement to include the MIB from the outset is not required where a claimant reasonably believes that there is an RTA insurer and has given RTA notice accordingly. However this will not protect a claimant who either fails to give an insurer adequate RTA notice or who wrongly attempts to pursue an insurer direct relying on the European Communities (Rights against Insurers) Regulations 2002 where the insurer has no contractual liable to indemnify the driver. A prudent claimant would probably be well advised to include an RTA insurer in the proceedings as a named defendant such that, should that insurer not have an RTA liability, there can be no dispute that (a) they have had notice and (b) every opportunity to defend the claim, particularly as, more often than not, the insurer will defend the claim in the name of the MIB as Article 75 insurer. Certainly these remaining potential pitfalls are easily avoided by care being taken pre-issue to ascertain the true position.

The 1999 Agreement excludes from compensation claimants who have knowingly allowed themselves to be carried in vehicles:-

• which have been stolen or unlawfully taken (a similar exclusion applies under the Road traffic Act 1988 (“the 1988 Act”) – see section 151(4));

• which are uninsured;

• used in furtherance of a crime; or

• to avoid lawful apprehension.

The latter two exclusions are not permitted by EU law and in the recent decision of Delaney v Secretary of State for Transport [2015] 3 All ER 329 resulted in the Secretary of State for Transport being ordered to pay Francovich damages because of its failure to properly implement EU law. In that case the claimant’s actions of being involving in the transportation of drugs, were insufficient to trigger the common law defence of ex turpi causa. It is therefore no surprise at all that the last two exclusions have been removed from the 2015 Agreement.

The presumptions around ‘knowledge’ have also been removed and the Agreement brought into line with the definition of ‘knowledge’ in sections 143(3) and 151(4) of the RTA (i.e. actual knowledge or constructive/”blind eye” knowledge). The 1999 Agreement refers to “ought to have known” whereas now the 2015 Agreement refers to “had reason to believe”; this change brings the Agreement into line with the House of Lords decision in White v. White [2001] 2 All ER 43 and accordingly, the change will make no difference in practice to the claims the MIB seeks to exclude.

Under the 1999 Agreement, due to a drafting error, the exclusions applying to passengers with knowledge did not apply to those cases involving fatalities (only knowledge of the claimant rather than the passenger killed could be taken into account – see Phillips v. Rafiq and the MIB [2007] 3 All ER 382). That loophole has now been removed – see Clause 8(4).

Clause 9 of the 2015 Agreement makes it clear that the MIB has no liability for terrorist acts and mirrors a similar provision within the 2003 Untraced Drivers’ Agreement (see Clause 5(1)(d)). Since the introduction of the 2015 Agreement, the government has been led to reconsider the lawfulness of such a blanket exclusion and has conceded that it should not be included. However focusing unduly on this point is to ignore the reality of the situation: save for the sort of terrible incident involving the death of Fusilier Lee Rigby it is extremely difficult to imagine circumstances where a vehicle could be used for terrorism whilst at the same time the vehicle being ‘used’ as a vehicle, such that the provisions of the 1988 Act apply. Following on from AXN and others v. Worboys and Inceptum Insurance Co Ltd [2013] Lloyd's Rep IR 207 - where it was held that the actions of a taxi driver drugging and raping/sexually assaulting female passengers was not a liability required to be met by a motor insurer under the 1988 Act - terrorist actions where the vehicle is not being used as a means of transport are most unlikely to be caught by the 1988, e.g. the detonation of a car bomb.

The exclusion under the 1999 Agreement in respect of subrogated claims has been a bone of contention, particularly around what was and was not deemed a subrogated claim and therefore one which the MIB did not have to meet. Insurers often seek to adopt Article 75 status in order to avoid subrogated claims. There should be no fundamental objection to such a tactic as it is essentially a case of ‘swings and roundabouts’ so far as the insurance industry as a whole is concerned. Clause 6(1) of the 2015 Agreement extends the scope of what is deemed a subrogated claim to include: “… any claim, or any part of a claim, in respect of which the claimant has received, or is entitled to receive or demand, payment or indemnity from any other person (including an insurer), not being the Criminal Injuries Compensation Authority or its successor.” Accordingly, not only are true subrogated claims or claims which could be subrogated excluded but also those where the claimant has chosen not to claim off an insurer for whatever reason. So if a claimant chooses not to claim against an insurer and, through delay, etc, loses their entitlement to claim, such a claim is still excluded under the new Agreement (see Clause 6(3)). This change could have a profound impact on credit repair claims and it is clear from the MIB’s Guidance Notes that victims of uninsured motorists are expected to utilise their own insurance when available.

Where a claim is partially subrogated, the MIB will be liable for costs on a strictly pro-rata basis. For example, this makes it particularly easy to assess costs for small claims track recovery actions where part of the sum claimed is subrogated and part is not.

Unlike an RTA insurer (who can rely on section 148 (4) and (6); section 151(7) and (8) of the 1988 Act and possibly contractual rights of recovery) the MIB does not have a statutory right of recovery against an uninsured motorist or any insured person who causes or permits the vehicle to be driven without insurance. The MIB have for many years principally relied on consent and assignment agreements, whereby the victim, in return for being compensated by the MIB, would assign their cause of action to the MIB. Clause 15(b) now makes it a mandatory requirement for a victim to agree to assign their cause of action to the MIB ahead of settlement of their claim. This will therefore make it easier for the MIB (and also Article 75 insurer) to pursue recoveries which in turn may help to dissuade motorists driving uninsured – despite the introduction of Continuous Insurance Enforcement and MID, far too many motorists continue to drive without insurance or without valid (i.e. that is not liable to be voided) insurance.

The MIB has always been required to meet a liability required to be covered by Part VI of the 1988 Act, which generally extends to cover trailers, at least when being towed. However the new Agreement extends that liability in one very limited respect: as the guidance spells out “If … the claim arises from the use as a trailer (1) of a stationary, uncoupled trailer or (2) of a moving, uncoupled trailer (but where the motion is not brought about by a motor vehicle), MIB will meet any unsatisfied judgment obtained regardless of whether or not there is a specific insurer covering the trailer in either of these circumstances. If there is a specific insurer, MIB will then look to recover its outlay from any such insurer.” This change reflects the wide definition of a vehicle under the Sixth Directive which includes “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”. Nevertheless, instances of out of control burger joints rolling down hills causing injury and damage, must be few and far between.

The seldom used right of appeal to the Secretary of State has now been replaced with a right of appeal to a QC arbitrator (see Clause 17). The instances of such an appeal process being required will no doubt remain extremely limited.

Some claimant lobbyists will continue to highlight what they consider to be problems with UK legislation. For example, the issue of RTA liability (and therefore the MIB’s liability) being restricted to incidents occurring on/in a “road or other public place” and the need for insurance being limited to “a mechanically propelled vehicle intended or adapted for use on roads”. The ECJ ruling in September 2014 in Vnuk v. Zavarovalnica Triglav d.d. C-162/13 that compulsory motor insurance has to cover any accident caused by the use of any mechanically propelled vehicle not running on rails that is “consistent with its normal function” irrespective of the location did tend to suggest that UK law would need to be changed (albeit not retrospectively). However the wide implications of a literal interpretation of the Vnuk judgment (e.g. the need to insure racing cars, golf carts, mobility scooters etc) are still be grappled with in Brussels and the extent of changes required by UK law may well be much more limited than some people have assumed to date.

This issue of the application of Vnuk, is one strand of the basis of an application for judicial review by the charity RoadPeace. In essence, the application for judicial review seeks to raise every conceivable potential difference between EU law (given its widest meaning) and UK law (not just perceived problems with the 2015 Agreement) – there are 9 main grounds and 25 subsidiary grounds of complaint. Such challenges fail to consider in context whether the UK system, taken as a whole, provides a means whereby victims of road traffic collisions are reasonably able to obtain appropriate compensation for their injuries and losses. By way of example, RoadPeace seeks to challenge the MIB’s right to be joined into proceedings brought by the claimant against the uninsured motorist under the 2015 Agreement, despite the fact that both APIL and MASS agree that such a requirement is appropriate and fair.

Notwithstanding the complaints of a small minority of commentators, the 2015 Agreement is generally much simpler to understand, less cumbersome and will present much less of a potential minefield for the unwary claimant representative. Of course, for the next few years practitioners will of course need to be mindful of whether they are dealing with a claim under the 1999 or 2015 Agreement. In due course the MIB and the government will introduce a new Untraced Drivers’ Agreement.

Andrew Baker
Partner
Horwich Farrelly Solicitors

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