MIB welcomes the decision of the Supreme Court in Moreno v MIB [2016] UKSC 52, which clarified the proper interpretation of the Regulations which implemented the Fourth European Motor Insurance Directive (2000/26/EEC) into UK law.

This decision will enable MIB as the UK Compensation Body to compensate UK citizens injured in accidents in other EEA Member States through the fault of a motorist in the same way as they would have been compensated had they brought their claims in the country where the accident took place.

Ms Moreno was the victim of an accident in Greece whilst on holiday in 2011. She was seriously injured after being hit by an uninsured motorist. As the driver was uninsured, Ms Moreno was entitled to bring her claim against MIB which acted on behalf of the Greek Auxiliary Fund (‘GAF’), the body in Greece responsible for compensating victims of accidents involving uninsured motorists.

MIB accepted liability for the accident on behalf of the GAF, but a dispute arose as to which law applied to the assessment of damages. Ms Moreno sought damages assessed in accordance with UK law, whilst MIB argued that Greek law should apply, reflecting where the accident occurred as would have been the case had the motorist been insured.

Background: Green Card Scheme and Motor Insurance Directives

The Supreme Court decided that resolution of the applicable law issue depended upon the understanding of and intention behind the scheme of victim protection provided firstly by the Green Card Scheme and thereafter built on by a number of European Motor Insurance Directives.

The Green Card Scheme was initiated by UN Recommendation in 1949. It came into force in 1953 and saw the introduction of a uniform insurance card (the Green Card), which would guarantee that motorists would be insured against compulsory third-party risks when visiting other countries. Each country would set up a National Insurers’ Bureau to guarantee the settlement of claims arising from accidents occurring in its own territory caused by foreign vehicles registered in another participating country. The Bureau in the country of accident would compensate the victim under its national laws and then recover costs from the Bureau where the liable vehicle was normally based.

The system has since developed and expanded. The presentation of a Green Card is no longer required across all participating countries following the initiative proposed under the First Motor Insurance Directive 72/166/EEC, which abolished border insurance checks on vehicles normally based in other Member States in order to facilitate the free movement of traffic. Any vehicle registered in another Member State would be deemed to have insurance covering the minimum legal requirements of the country visited, whether insured or not. Since inception of the Green Card Scheme, the level of compensation has always been determined by the law of the country of accident.

The Second Motor Insurance Directive

The Second Motor Insurance Directive (84/5/EEC) called for the establishment of a guarantee body in each Member State to provide compensation for victims suffering injury or damage caused by uninsured or untraced motorists. MIB fulfils this role in the UK as the National Guarantee Fund and in fact it has been doing so since 1946. Again, the emphasis has always been that the guarantee body would compensate in accordance with the law operating in its own territory.   

Relevance of the Fourth Directive

With schemes in place facilitating the compensation of victims of accidents caused by insured, uninsured and untraced motorists in their own territory, there remained a gap in the protection net, namely the need to allow a person injured in another Member State to claim in their Home State rather than face the difficulties of claiming in an unfamiliar setting. The Fourth Directive was introduced to fill this gap and required all EEA insurers to appoint a claims representative in each Member State to handle and settle claims on their behalf.

The scheme enables a victim of an accident abroad caused by an EEA registered and insured vehicle to pursue their claim in their own country and own language against the insurer via its local claims representative. The claims representative liaises with the victim and compensates in accordance with the law of the country of accident (albeit that this is now subject to certain limited exceptions under Regulation (EC) No 864/2007)(‘Rome II’).

The Fourth Directive also required Member States to set up and approve a Compensation Body and an Information Centre. MIB fulfils the role of both bodies in the UK.  

• The main role of the Information Centre is to provide victims with insurance and claims representative details when involved in accidents overseas. Information Centres correspond with each other to provide and pass on the relevant details.
• The role of the Compensation Body is to act as a claims handler where (a) an insurer has failed to appoint a claims representative, (b) the insurer or appointed claims representative has failed to provide a reasoned response to the claim within 3 months, (c) there is no valid insurance or (d) the vehicle/driver is unidentified.

The intention of the Fourth Directive

The UK implemented the Fourth Directive into national law by way of The Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003 (SI2003 no 37) (‘the 2003 Regulations’).

The Supreme Court made it clear that the 2003 Regulations were intended to give effect to the mechanism established by the Fourth Directive and that they should, therefore, be construed with this in mind.

Prior to Moreno v MIB, the wording of the 2003 Regulations had been interpreted by the Court of Appeal in Jacobs v MIB (2010) EWCA Civ 1208 and in Bloy v MIB (2013) EWCA Civ 1543 as giving a victim a freestanding right to claim compensation from MIB as the Compensation Body assessed in accordance with UK law even though liability was to be assessed in accordance with the law of the country of the accident. It was this interpretation which MIB sought to challenge in the claim brought by Ms Moreno on the basis that it was inconsistent with the protective thread developed through the Green Card Scheme and the Motor Insurance Directives which sought typically to apply the law of the country of accident.

Prior to the Fourth Directive, the victim of an accident abroad could pursue their claim against the liable person, insurer or guarantee fund in the country of accident and would be awarded compensation in accordance with the law which applied there. The intention behind the Fourth Directive was to facilitate the compensation process, making it easier for victims to pursue claims against foreign tortfeasors in their own country and language. It was not intended to change the applicable law.

Indeed, where there is an insurer identified and a claims representative handling the matter, it has never been disputed that the applicable law is that of the place of the accident. The Supreme Court concluded that it would be anomalous if the law applicable to an uninsured or untraced driver claim should be different to that where an insurer was identified.

This anomaly was best highlighted by showing how the applicable law could change throughout the handling of a claim. For example, a claim could be presented to the UK Compensation Body when the foreign insurer or its claims representative failed to provide a reasoned response within 3 months. The Fourth Directive and the 2003 Regulations make it clear that MIB must cease to act if the foreign insurer or its representative subsequently provides a reasoned response. This scenario would result in the claim passing from insurer/representative to MIB and back again with the applicable law (and inevitably the level of compensation) changing at each stage. This could not have been intended and so the Supreme Court held that Jacobs v MIB and Bloy v MIB had been wrongly decided on the applicable law issue.

Moreover, the Supreme Court was troubled that UK damages would not always be more favourable than compensation awarded in accordance with the country of accident. Examples provided in MIB’s submissions were personal injury claims in the Republic of Ireland, where damages can be higher, or fatal accident claims in Italy where a wider range of victims can claim for what is often referred to as ‘moral damages’. To award UK damages in these circumstances (as Jacobs vMIB required) may have exposed the UK government to Francovich claims for damages to make good any shortfall which was not the intention of the scheme.

The potential impact on UK premium-paying motorists

Another important factor in MIB’s reasoning was the level of reimbursement it could obtain from its foreign counterpart after having compensated a victim.  The Fourth Directive required EEA Compensation Bodies to conclude an agreement relating to their functions, obligations and the reimbursement procedure. All EEA Compensation Bodies therefore signed the 2002 Agreement between Compensation Bodies and Guarantee Funds (‘the 2002 Agreement’).

MIB is funded by UK motorists by way of levies collected from all insurers underwriting business in the UK. If MIB could not recover in full under the 2002 agreement, having compensated a victim at a higher level than would have been payable under the law applicable to the country of accident, the shortfall would be borne by UK premium paying motorists, who should not have to bear the costs arising from the wrongdoing of foreign motorists.

The impact of Rome II

Rome II came into effect in January 2009. It sought to clarify conflict of law scenarios in non-contractual obligations (e.g. tort cases) and required the application of the law of the place of accident to both liability and the assessment of damage (subject to certain exceptions). As the Fourth Directive scheme was clear, the Supreme Court did not address the application of Rome II in detail though the impression given was that it would have applied.

The Supreme Court’s conclusion

The Supreme Court ruled that the level of compensation afforded to a victim should be consistent with the level applicable to a direct claim against the responsible motorist and with the level which applies to claims involving insured vehicles.

The Supreme Court agreed with MIB and stated that “thescheme of the Directives is clear and they do not leave it to individual Member States to provide for compensation in accordance with any law that such States may choose. On the contrary, they proceed on the basis that a victim’s entitlement to compensation will be measured on a consistent basis, by reference to the law of the state of the accident.”

David Holt, Head of Large Loss and Technical Claims at Weightmans LLP, acted for MIB in this case and commented: “The decision is both logical and welcome. It shows that the process of victim protection as embodied in the Green Card Scheme, the Guarantee Fund requirements and, more latterly, the requirements in respect of visiting victims all operate to a consistent theme, namely that, in general, the law of the country of accident will be the applicable law for both liability and the assessment of damages. The  Fourth Directive did not intend to alter the applicable law.

“MIB should be entitled to reimbursement in full in these cases and this decision should go a long way to ensure that this is possible. UK motorists should not, through insurance premiums, have to fund accidents abroad which do not involve UK registered vehicles. The decision highlights again the need for the traveller to be aware that there can be considerable differences between compensation levels in different countries.”

A version of this article appeared in New Law Journal in October 2016.