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Commission proposes to clarify Motor Insurance Directive to maintain Vnuk ruling

The European Commission has released the outcome of deliberations on the operation of the scope of the Motor Insurance Directive  ("the Directive") which it began following the highly publicised CJEU decision of Vnuk in 2014. A press release on the Commission's proposal indicates a preference for what has been described as the baseline or "do nothing" option which would leave the Directive, in effect, as it stands, with amendments only to confirm the application of Vnuk and the later decision in Rodrigues.

The decisions in Vnuk and Rodrigues apply the Directive in its current form and any clarification amendments, whenever they are made, will not therefore change the meaning of the Directive. However, the proposals and any amendments to the Directive will bring some imperative to alter domestic legislation across the member states. The baseline option was not favoured by the UK government for reasons which have been extensively expressed. How these proposals will play out in the UK remains to be seen.

Recap - Vnuk

The Vnuk decision in 2014 highlighted three areas where, it is widely acknowledged, the Road Traffic Act 1988 fails to implement the Directive:

The Directive requires insurance for use of a vehicle in the territory of the member states, including private land. The Road Traffic Act applies only to roads and public places.

The Directive requires insurance for use of a motor vehicle which is defined as a vehicle "intended for travel on land". On the other hand, the Road Traffic Act defines a motor vehicle as one "intended or adapted for use on roads".

The Directive requires insurance for use of a vehicle which the CJEU equated to "the normal function of that vehicle". The Road Traffic Act also refers to cover for use of a vehicle but does not curtail reliance of policy terms limiting cover to certain uses.

Recap - Rodrigues de Andrade

The 2017 decision in Rodrigues de Andrade  endorsed the approach taken in Vnuk but applied additional considerations to the question of "normal function of the vehicle".

Rodrigues involved a tractor which was stationary in a vineyard with its engine running to drive a herbicide sprayer. A landslide caused the tractor to topple and fatally injure a vineyard worker.

In considering whether the tractor was subject to the Directive, the CJEU asked what was the use or normal function of the vehicle. The CJEU then looked to the Directive definition of vehicle, being one intended for travel on land and asked what was the normal function of a vehicle intended to travel on land, which was answered as being to travel or move from A to B.

The CJEU said that many vehicles have a dual function - to act as a vehicle to move from A to B and to act as a machine to perform a job of work. If a vehicle had two functions, the court must consider what it was principally being used for at the time of the incident. The Directive does not require insurance for all "uses" of a vehicle but only those uses associated with a vehicular function. At the time of the incident in Rodrigues, the tractor was a machine performing a job of work and did not fall to be insured under the directive.

Proposals

The Commission proposals come in response to the Roadmap review launched in 2016 and the REFIT review of the Directive launched in July 2017. These reviews can be seen as a reaction to disquiet over the impact of Vnuk and raised four options to address the issues created by Vnuk. One option, the baseline, is to leave the Directive as it stands requiring any member states whose domestic legislation does not reflect the Directive, as applied in Vnuk, to amend. The Commission's discussion of this option suggested its view was that the increase in premium which would result made the status quo option unattractive. The proposals now advanced will therefore come as a surprise to many.

The Commission's favoured option was thought to be the "in traffic" option which has similarities to the Vnuk/Rodrigues approach in that it imposes cover for the vehicular function but with the distinction that it was intended to apply to "areas where the public has access". This option was/is favoured by the UK government and was thought to alleviate the principal concerns created by Vnuk.

Consequences

The Vnuk and Rodrigues decisions apply the Directive as it stands and indicate that the Road Traffic Act 1988 is incompatible with the Directive in the three areas discussed in Vnuk. The Rodrigues interpretation of the word "use" is confined to vehicular use and would support a more restrictive application of "use" under the Road Traffic Act than has been seen in some English decisions.

The Commission proposals confirm an intention to keep the current meaning of the Directive, as applied in Vnuk and Rodrigues. The proposals do not therefore alter the position that has been known since the Vnuk decision in September 2014 and which existed before that decision.

The decision in Vnuk cannot amend English legislation. However the English courts must, under the Marleasing principle, interpret English law so far as possible in accordance with European law. The UK has already seen decisions which display a Vnuk approach so far as they are able to, bearing in mind that the courts must adhere to English law where the Road Traffic Act is clear. A Marsleasing approach is likely in our view to allow the English courts to apply Rodrigues in imposing a vehicular function to the term "use" within the Road Traffic Act, without any amendment to the Road Traffic Act.

The Court of Appeal decision in RS Pilling which considered "use" of the vehicle has been appealed to the Supreme Court and we understand is to be heard in December 2018. The decision will be significant to the future application of the Road Traffic Act (with or without amendment) and will be watched keenly.

What happens now?

The Commission has invited feedback on the proposals which must be submitted by 24 July 2018.The impact of Vnuk on UK laws has always been clouded by Brexit and uncertainty over the extent to which the UK government would be compelled or may choose to amend legislation to reflect Vnuk and later decisions. The Commission's proposals are not those which the government favoured and we would expect there will be significant resistance to change. The UK already has in place compulsory motor insurance legislation which is widely acknowledged to improperly implement the Directive. It remains to be seen to what extent there will be an appetite to make highly controversial changes to the legislation to bring it into line with the Directive when we have left the EU.

Contact

For further information, please contact Amy Jeffs, Director, Commercial Insurance on 0151 907 3303

By Amy Jeffs

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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