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When an accident occurs involving a work vehicle, insurers will consider whether the accident should be covered under the defendant’s employers’ liability/public liability (EL/PL) policy or their motor policy.
Often these two policies will include wording to the effect that in situations where compulsory motor insurance applies, the matter will be covered by the motor policy. Insurers then consider whether the accident circumstances are those which required compulsory motor insurance under the Road Traffic Act 1988 (the Act).
Sections 143 and 145 of the Act require compulsory motor insurance for third party liabilities caused or arising out of the use of vehicle on a road or other public place in Great Britain. The most divisive elements of this have been the definition of ‘road or other public place’ (with ‘other public place’ added only in the year 2000) and ‘use of’ a vehicle. Unhelpfully, the Act does not define ‘other public place’ and this terminology is not used consistently in the Act (see s158 for example).
The position before Brexit
Pre-Brexit, Article 3 of Directive 2009/103/EC (Sixth Motor Insurance Directive) required Member States “to ensure that civil liability in respect of the use of vehicles normally based on its territory is covered by insurance”. The European Court of Justice (ECJ) was asked by the Slovenian Supreme Court in the infamous case of Vnuk v Zavarovalnica Triglav [2016] to consider the tension between their domestic law and this Directive. One could be forgiven for not appreciating at the time the relevance of a Slovenian farmer being knocked from his ladder by a trailer attached to a tractor on motor insurers across the EU, and particularly those operating in England and Wales.
It was ultimately held by the ECJ that compulsory insurance was required for any vehicles consistent with the normal function of that vehicle, regardless of whether they were on public or private land. This did not fit with the wording of the Act and as such, caused much concern for the motor insurance market. Whilst the UK Parliament did nothing to bring the Act in line with Vnuk, the courts generally followed the ECJ’s decision, setting precedent along the way.
The position following Brexit
Post-Brexit, the Motor Vehicles (Compulsory Insurance) Act has recently passed the final parliamentary stages and will shortly come into force. The Act, which has received cross-party support, has been introduced following an analysis of the cost of implementing changes to the Act, following the 2017 decision in RoadPeace v Secretary of State for Transport and MIB. This decision confirmed that UK law was non-compliant with the Motor Insurance Directive. The new Section 156A will nullify any retained EU law and effectively return us to the pre-Vnuk days of compulsory motor insurance only being required for a more restricted class of vehicles on a road or public place and not on private property.
The new Act has been welcomed by the insurance industry, with the MIB stating that:
Motorists will no longer be faced with the additional costs, relating to future accidents on private land and accidents involving a range of extra vehicles – including lawnmowers and golf carts. This will save all motorists money and take us back to the common-sense approach we had before the Vnuk ruling in 2014.
Below, we discuss what will new legislation this mean for EL/PL and motor insurers when deciding who should cover an accident involving a work vehicle.
EL/PL insurers
From an EL/PL perspective, ultimately this new legislation will likely mean that there will be less situations where compulsory motor insurance applies to accidents involving work vehicles. This will be particularly relevant to EL claims where the majority of motor based accidents occur on private premises using plant based machinery.
As such, if EL/PL insurers continue to exclude vehicle related accidents only where compulsory motor insurance applies, they may now find themselves unable to exclude as many incidents as they once could. Consideration may need to be given as to whether they intend to amend the wording of their exclusions or whether premiums should be amended to reflect the increase in risk of work vehicle related accidents being covered under the policy.
Motor insurers
For motor insurers, the enactment of this legislation will be something of a relief. The UK Parliament did not amend the Act following Vnuk and this therefore meant that, as it was incompatible with European Law, the courts intervened.
The decision in Lewis v Tindale and others [2019] meant that Vnuk directly impacted every UK motor insurer. A claimant negligently injured by an uninsured motor vehicle on private land could recover compensation from the MIB Central Fund (as an emanation of the government), because the government had failed to properly implement the Motor Insurance Directive as clarified by Vnuk.
The Motor Vehicles (Compulsory Insurance) Act 2022 will return us to the status quo. Compulsory insurance for motor vehicle is required to cover third party losses arising only on accidents on a road or public place. Vehicles only operating on private land should shortly not need to be covered by a specific motor policy.
Motor policies no longer need to be written to cover the use of a vehicle on private land (e.g. within a business’ yard or car park). Such accidents will be covered by EL insurance, if the use truly arises out of employment.
Insurers, businesses and consumers may therefore benefit from a clarification of the extent of risk a policy must cover and commercial motor premiums may well reduce. The clarity should also have the effect in reducing coverage disputes between EL and motor insurers, leading to further savings in the longer term when considering premiums.
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