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ECJ judgments throw insurance and motorsports into confusion

Your insurance premium may be about to go up and motorsport could be in serious danger because of one Slovenian tractor accident, write the BMF’s Anna Zee. Here’s why.

Remember the name Vnuk? Slovenian chap who got knocked off a ladder by a tractor reversing with a trailer into a farmer’s barn? His claim for compensation went all the way to the European Court of Justice, which ruled in his favour. You may recall headlines about having to insure your segway, mobility scooter or ride-on lawnmower because, on the face of it, this judgment changed what we thought was the scope of the Motor Insurance Directive (MID). Two other cases have also led to re-interpretations of the scope of the MID, and it now looks like wider changes are about to happen as a result of these three cases.

The MID is the EU directive which regulates Motor Third Party Liability (MTPL) insurance. It ensures that third parties suffering personal injury and/or property damage caused by a vehicle in all EU member states should be able to receive compensation.

The MID’s basic objective is to ensure that some consistency between countries exists and it requires that MTPL insurance covers the whole of the EU, specifies minimum amounts of liability for personal injury and property damage to be covered and requires that there is a guarantee fund to cover liabilities incurred by uninsured drivers and derogated (i.e. exempted) vehicles. A part of every motor insurance premium goes to that guarantee fund. In some EU member states, the maximum compensation that can be paid is the MID-specified minimum. In others, it is higher. In the UK, Ireland and Norway, it is unlimited.

Because it is a directive, each EU member state writes its own laws to make it effective. In the UK, the MID is implemented under the Road Traffic Act and the guarantee, or default, fund is administered by the Motor Insurance Bureau. We originally interpreted the MID as covering all mechanically propelled vehicles used on public roads, but in practice it includes most areas used by vehicles which are accessible by the general public – a supermarket car park is covered, for example, even though it is not actually part of a road. A similar interpretation was made by a number of other EU member states, but not all of them. Complete consistency of interpretation was not assisted by the fact that translated versions of the MID did not all say exactly the same thing in every language.

The three cases – Vnuk, Andrade and Torreiro – which were brought to the European Court of Justice led to the scope of the MID being re-interpreted. I cannot do better than quote from the European Commission’s impact assessment: “In the Vnuk ruling, the Court ruled that any use of the vehicle that is consistent with its normal function should be covered. In Rodrigues de Andrade, the Court ruled that “normal function of the vehicle” is to be understood to be linked with its “transport” function and not any other function that a vehicle could have (e.g. ploughing in case of a motorised plough). In Torreiro, the Court ruled that the characteristics of the terrain have no bearing to determine whether the vehicle is in “normal use” or not. This means that victims are protected in case of motor accidents, regardless of the characteristics of the property or terrain on which the accident occurred. However, the use of the vehicle in case of a motor accident should be linked to its transport function and not to any other potential function it may have.”

So which vehicles should have motor insurance? I think that means you wouldn’t have to have insurance for your ride-on lawnmower while mowing, but you would if you use it to go shopping. On the other hand, a farmer who uses a trail bike to get around his own farm, even if he never goes on public roads, would need insurance. A child’s electric toy car? Probably not. Mobility scooters? Yes. An armoured personnel carrier used on restricted land for military exercises? Yes. Motorcycles racing around Brands Hatch circuit? Yes, probably, unless it can be determined somehow that going round and round a circuit is not a transport use.

It is perhaps ironic that, in an attempt to achieve greater consistency across the EU, the proposed changes could achieve greater inconsistency in the compensation paid for injury and this will vary from member state to member state. Why? Well, not all states in the EU have the same sort of overall insurance regime. Here in the UK, it is customary for employers to have insurance for employee injury and event organisers will have public liability insurance. However, not every EU member state has the same sort of regime.

Another factor is the amount of compensation payable under the different insurance policies. In the UK, the amount payable under a public liability policy is usually limited. A frequently used maximum is £10 million but, as stated earlier, there is no maximum on a motor policy. I understand that, if someone gets injured on a construction site, they would currently be compensated under employer liability. If the MID is changed, it could be that they would be compensated under the motor policy if they were injured by a construction vehicle moving materials across the site but would be compensated under employer liability if they were injured by a stationary crane. And, if it were possible to make a claim under either policy, then it makes sense to claim on the motor insurance because there is no limit on compensation.

Last year, the EC held a consultation on the MID. The consultation paper asked, among other things, four questions about the scope of the directive: whether the scope should include private land; should it be up to member states to exempt certain vehicles; should the scope include vehicles used for agriculture, construction, motorsport and/or industry; and what types of vehicle should be completely excluded at the EU-level. Finally, the EC issued a proposal for changes to the MID in May this year.

Changes are proposed under a number of headings, most of which the BMF does not regard as contentious. There are proposals which deal with the insolvency of insurers, claims history across borders (no-claims bonuses), minimum amounts of cover (promoting greater consistency across the EU) and uninsured driving across borders. We have no quarrel with those proposals. However, the EC has decided to codify – that is, write into the directive itself – the results of the Vnuk, Andrade and Torreiro ECJ judgments and this changes the scope of the directive itself.

There are three aspects to the scope issue. First, there is the extension to cover all terrain. It is likely to prove impossible to enforce on private land and could be extremely hard for insurance companies to investigate, so it has great potential for fraud and probably even more so if that private land crosses borders. It is impossible to be certain exactly how much this will cost in advance, but estimates are another matter and the consultation response from the DfT included a section where they estimated the additional costs incurred by including private land. I don’t know how they derived the figure in the first instance, but they added another 75% for fraudulent claims!

The next issue is the extension to vehicles not previously in scope. Strictly speaking, some of this extension is more the result of the extension to all terrain. Mobility scooters are mostly used on pavements rather than carriageways, for example. But what about snowmobiles, which are mostly used off-road but can be used on it? What about segways? Electric bicycles: in or out? I suspect that many of these ‘vehicles’ will be exempt from motor insurance by individual states, but what does that mean? It means that, if a pedestrian gets knocked down by a mobility scooter, they would be able to claim from the default fund. That in turn means the default fund has to have the necessary money in it to pay out and that means those of us who do pay for motor insurance get to pay into the fund on the behalf of those who don’t.

The elephant in the room is motorsport and there is a real concern that this change to the MID could kill motorsport. It wouldn’t happen immediately at the national level, certainly, but it is notable that all of the bodies involved in motorcycle sport in the UK were concerned enough to send joint detailed feedback on the MID proposals. There is one country in the EU which has already implemented the change in scope – it took effect this April – and that is Finland. According to the UK Motorsport Group, motorcycle premiums in Finland went up to €5,000 for motocross machines and from €200 to €2,000 for road-registered enduro bikes. This premium is being quoted because the machine could (note could, not will) be used for competition. Premiums like that will be disastrous for amateur sport.

Feedback on the MID proposals has gone in from FEMA and I have sent a response from the BMF supporting the FEMA feedback. We are considering, with FEMA, what lobbying work may be desirable. The current timetable for the European Parliament means that, if the current proposal is not passed by next April, it would have to be re-introduced after the next EU elections.

Does this mean it will be more expensive to travel in Europe? It is possible, I suppose, that the post-Brexit UK could revert to our original interpretation of the scope of the MID. In which case, it might prove necessary to also revert to getting a ‘green card’ if you want to use your bike in mainland Europe. I expect that will come at a price. Oh, and if the EHIC card is no longer possible to obtain, I expect that you will need additional health cover in your travel insurance. That will probably cost more too…

This feature originally appeared in the Autumn 2018 issue of Motorcycle Rider.