Adding insult to injury: Sarah Prager & Chris Deacon outline why the government’s recent Vnuk policy decision is worrying news for serious injury victims.
On 21 February 2021, the government announced its plans to ‘bin the EU’s Vnuk motor insurance law’, which, it said, would ‘ensure every British driver is spared an estimated £50 annual increase in insurance premiums’ and ‘reiterate the benefits of leaving the EU, as we take back control of our own laws and regulations’.
According to the government, had the law been implemented the insurance industry would have been liable for almost £2bn a year in extra costs, and these costs would probably have been passed onto their policyholders. Furthermore, the policy decision would protect the UK motorsports industry, saving it £458m a year in additional insurance costs. The announcement described the move as ‘a clear win for motorists in Britain’, and the Department for Transport was unable to identify any downside to it.
Rarely can any minister have had such an easy decision to make; clear savings for motorists, the protection of an industry that employs hundreds of thousands of jobs, and no discernable disadvantage to anyone. It sounds too good to be true; but is it? Or, in reality, is this a policy which is a politically motivated attempt to sell Brexit as a success story, when it will in fact deny innocent victims the compensation they need on a lifelong basis following serious injury, and remove the high level of protection previously afforded to victims of motor vehicle accidents?
The decision in Vnuk
In Vnuk v Zavarovalnica Triglav (Case C-162/13) the Court of Justice of the
European Union (CJEU) determined that the Motor Insurance Directives should be interpreted so as to provide for compulsory insurance for use of motor vehicles consistent with the normal function of the vehicle, including, crucially, their use other than in traffic, and their use on private land (on the facts in Vnuk, the use of a tractor and trailer during the process of stacking hay bales in a barn).
The CJEU applied a purposive interpretation of the Directives; it observed that their objective was the protection of the victims of accidents caused by vehicles, without any limitation in respect of the use of those vehicles, or whether the accident occurred on a public road or private land.
There is a compelling argument for compulsory motor insurance to apply in the universal, non-discriminatory way in which the CJEU found it should in Vnuk. Otherwise, the innocent victim would be denied compensation simply because they had the misfortune of being injured on private land or because the vehicle being negligently operated by the driver at the time happened to be an agricultural vehicle, rather than a ‘motor vehicle’ in the traditional sense.
The effect of the decision on UK law
The decision in Vnuk rendered the Road Traffic Act 1988, s 143 of which only provided for compulsory insurance for motor vehicles used on a road or other public place, non-compliant with the Directive.
Even though the UK government had failed to ensure its statute book complied with EU law, the English courts still attempted to give effect to the reasoning behind the Vnuk decision.
First, in the rather unusual case of Wastell v Woodward  2 WLUK 717, the Road Traffic Act was held to be engaged, and the insurer of a burger van which caused the injury held liable to compensate the claimant, notwithstanding the fact that the burger van was not at the time of the accident being used as a motor vehicle.
Then, in Lewington v MIB  10 WLUK 672, a dumper truck was held to be a ‘motor vehicle’ within the meaning of the Act.
After that, with some inevitability, RoadPeace obtained a ruling that, following the decision in Vnuk, compulsory insurance under the Act should be extended beyond vehicles used on roads (RoadPeace v Secretary of State for Transport  11 WLUK 114,  All ER (D) 74 (Nov)), but the court declined to read the wording of the Directive or of the CJEU Vnuk decision into the Act, finding the appropriate remedy for any claimant wishing to bring a Vnuk type claim was a Frankovich (Francovich v Italy (1991) C-6/90) claim against the British government for failure to implement the Directive properly.
In the absence of any immediate amendment to the Act, the Court of Appeal in MIB v Lewis  6 WLUK 26 found that the directives had direct effect against the Motor Insurers’ Bureau, as an emanation of the state, and that therefore the MIB was liable to compensate a claimant injured by a farmer who pursued him across private land in an uninsured car. Most recently, Mr Justice Freedman came to a similar conclusion in Colley v Shuker  12 WLUK 183,  All ER (D) 17 (Apr) in which the MIB was liable as an emanation of the state to compensate the claimant, who had got into the car knowing that the driver (rather than the vehicle) was uninsured.
These decisions are classic examples of English courts attempting to achieve a result which appears, at first sight, impossible; the Road Traffic Act did not comply with the directives, yet claimants could be compensated as the EU regime of compulsory motor insurance had intended.
The response of the UK government
Having been found by the court in RoadPeace to be in breach of its obligations under the directives, the UK government asked the Government Actuary’s Department (GAD) to consider its options in the light of the ruling in Vnuk. The various options the GAD was asked to consider included: comprehensive, unlimited third-party liability insurance; comprehensive insurance with caps on liability ranging from £5m-£50m; and limited coverage which only covered a vehicle operating on a road/other public place.
The resulting GAD calculations showed that covering claims falling outside the existing Road Traffic Act but within the Vnuk interpretation of the Directive would be extremely expensive, not least due to a high level of anticipated fraud. However, the GAD pointed out that its figures are subject to ‘a high level of uncertainty’ and that ‘alternative reasonable assumptions could produce very different results’. The resulting figure of £2bn referred to in the government’s announcement of 21 February should therefore be treated with a degree of caution.
It is unclear what is meant by the government’s statement that it will ‘bin the EU’s Vnuk motor insurance law’. It may simply indicate that the Road Traffic Act will not be amended to align it with the decision; or it may signal an intention to legislate to overturn the decisions against the MIB referred to above, which currently remain good law notwithstanding the announcement. What is apparent from the policy announcement, however, is that the government is in no hurry to ensure a high degree of comprehensive protection for those who are seriously injured at the hands of a motor vehicle.
The government’s Vnuk policy decision is presented as a victimless one. But of course it is not. Mr Vnuk, Mr Lewis and Mr Colley were all compensated for their injuries as a result of the decision in Vnuk; but for that, they would all have been pursuing individuals with little or no ability to satisfy a judgment against them; they would not have recovered any damages and would have fallen (very likely exclusively) back on the state to meet their lifelong needs.
A further worrying feature of the government’s intended policy is that it means certain individuals/companies can continue operating potentially dangerous activities (notably quad biking) for commercial gain without any insurance in place should a participant fall victim to a serious injury.
Automated vehicles may well find their way into farming and agriculture before hitting the public roads and would also fall outside the scope of compulsory insurance requirements unless legislation demands otherwise.
The reference in the government’s announcement to the motorsport industry is a particularly surprising one. Conflating compulsory motor insurance for ordinary motor vehicles with the motorsports industry is misleading. It is a commercial reality that large-scale motorsports events will be covered by insurance, usually running to tens of millions of pounds. This is particularly the case for events sanctioned by the National Governing Bodies for motorsports and overseen by the Fédération Internationale de l’Automobile. Extending compulsory motor insurance coverage to events which already have extensive insurance in place should not have any impact on the premiums paid by everyday motorists, and certainly not on the scale suggested by the government.
Furthermore, the government has not offered any statistics on how many accidents and the likely level of additional compensation payments that would be captured by extending compulsory motor insurance to vehicles used on private land. This represents an additional weakness in the assumptions which underpin the GAD’s conclusion on the likely rise in insurance premiums. Such accidents are likely to be limited in number and it is questionable whether extending the scope of compulsory motor insurance to a further, small pool of motor vehicles and/or uses would have such a disproportionate impact on motor premiums. On the other hand, the limitation is likely to have an arbitrary disproportionate impact on serious injury victims seeking compensation. It is not unreasonable to expect motor insurers to compensate the relatively small number of people injured in accidents involving vehicles on private land, accidents for which, by the very nature of the fault-based regime, they are not to blame.
This ‘clear win for motorists’ will inevitably leave innocent victims uncompensated. Motorists may save £50 on premiums, but they, like all taxpayers, will be required to fund injured parties’ care and other needs, which would otherwise be met by insurers. The knock-on effect of the government’s policy not to extend compulsory motor insurance coverage is to extend the liability of the state to meet the needs of serious injury victims at a time when the state can ill-afford to do so.
There is also reason to question the £50 ‘saving’ trumpeted in the press as if premiums were to reduce. They will not. The figure of £50 relates to the increase in premiums the government projects would be necessary as a result of providing for injured claimants to be compensated in Vnuk cases. Even if there is a nominal rise in premiums, the average person on the street would likely consider this a small price to pay for compulsory insurance if they or their loved ones suffer life-changing injuries caused by someone else’s negligence.
The government’s approach to Vnuk claims appears to be a worrying continuation of a trend which encompasses the whiplash reforms coming into force on 31 May and the approach to holiday sickness claims, both of which areas are unlikely to leave catastrophically injured claimants undercompensated. But the resistance to the extension of compensable motor accidents to those occurring on private land does carry significant risk that serious injury victims may have no legal recourse to any party capable of satisfying a meaningful judgment in their favour. Whether the government believes that it is right for insurers to be forced to compensate claimants in Vnuk claims or not, it is unfortunate that its decision appears to be founded on the continued assumption that claims made against insurers are largely fraudulent. It is suggested that this assumption, if it is to underpin future decisions regarding the incidence or quantification of compensation, ought to be tested, and that the true cost of satisfying fraudulent claims—and that of under-compensation of valid claims—should be proven to a high standard of proof.
This article was first published in New Law Journal, 23rd April 2021