Prior to September 2014 an internet search for ‘Vnuk’ may have found a few hits for a Russian rapper. Now, as most insurance professionals will know, it reveals widespread concern about a European Court of Justice (CJEU) judgment on motor insurance. Headlines include “The need to insure your lawnmower” and “The end of the road for motorsports” while Boris Johnson has called the whole thing “insane”. Department for Transport Minister, Andrew Jones, in his foreword to the Government’s consultation on the issue, called it “a complete game-changer as far as motor insurance is concerned.” Indeed, it could be.

Open to interpretation

To recap, Damijan Vnuk was working on a farm in Slovenia. He was inside a barn, up a ladder, when it was struck by a trailer attached to a reversing tractor. His case was referred to the CJEU: insurers believed there was no compulsory insurance requirement because the tractor was being used as a machine, not a vehicle.

In its judgment, the CJEU stated that the tractor / trailer was a vehicle under the terms of the Motor Insurance Directive. Under Article 1, a “vehicle means any motor vehicle intended for travel on land and propelled by mechanical power, but not running on rails, and any trailer, whether or not coupled.” However, the question of when a vehicle’s use required compulsory insurance was less clear. On this, Article 3 of the Directive states: “Each Member State shall, subject to Article 5, take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance.”

The CJEU identified a key difference in the official translations of the French and English versions of the Directive. The French version, along with six other countries, linked compulsory insurance to use of a vehicle on roads, but the English version, along with 14 others, did not (although our law does!). The CJEU felt that the compulsory insurance requirement should not be left to individual Member States to interpret. It concluded: “The concept of ‘use of vehicles’ in that Article covers any use of a vehicle that is consistent with the normal function of that vehicle.”

Therefore, where a vehicle is used is no longer relevant in deciding whether it must be insured. The key question now is how it is being used: is use consistent with its normal function?

The restrictions of the Road Traffic Act

Since the 1930 Road Traffic Act (RTA), our law has linked the compulsory insurance requirement to the use of vehicles on a road. This was extended to include other public places in 2000. Moreover, the definition of ‘motor vehicle’ has been tailored to use on roads. Section 185 of the 1988 RTA states: “‘Motor vehicle’ means, subject to section 20 of the Chronically Sick and Disabled Persons Act 1970…, a mechanically propelled vehicle intended or adapted for use on roads.” This definition is far more restrictive than the definition in the Directive.

Until the Vnuk case, linking compulsory motor insurance to the use of vehicles on roads appeared entirely consistent with the aim of European law. The first EU Directive on Motor Insurance in 1972 was expressly intended to do away with border checks and to facilitate the free movement of traffic between Member States. Subsequent Motor Insurance Directives, whilst emphasising the need to protect third party victims, continued the same theme. Indeed, over the years there have been many references by the EU in a motor insurance context to “road traffic”. Article 12 of the current Directive refers to “users of the roads”. Vnuk shifted the emphasis further towards protection of victims and away from the original purpose.

Broadening the scope of the compulsory insurance requirement to cover ‘off-road’ use in respect of a wider definition of ‘motor vehicle’ opens up a myriad of problems for UK insurers, the public and for MIB.  

From dodgems and lawnmowers to industrial machinery

Many machines have never been the subject of the compulsory insurance requirement in the UK. They have not been viewed as motor vehicles. Many are not used on a road or public place. Some are insured voluntarily, others are not. Following Vnuk, ride-on lawnmowers, mobility scooters, Segways, certain children’s toys and even fairground dodgems are now in scope.

There are also industrial machines to consider, such as ride-on floor cleaning machines, fork lift trucks, combine harvesters or mobile platforms. Currently, many such machines will be covered by EL or PL insurance to reflect the risks arising from their use.

It would appear disproportionate and expensive to insist that the requirements of the Directive should apply in full in these situations. Policies would need to include €5 million liability minimum cover for using the vehicle anywhere in the EU and a guarantee fund in place. But who takes their lawnmower or floor cleaning machine outside the UK when they go on holiday? This could mean questioning the UK’s long-standing commitment for unlimited personal injury cover in the ‘road’ context which seems very much a backward step.

Specific examples: airports and motorsports

Vehicles used airside at airports will already have PL insurance, albeit with levels of cover that differ from the Directive.

In the motor sports arena, a racing car involved in competition on a private track is being used in a way consistent with its normal function. In the UK however, as in many countries across the EU, accidents between competitors do not require compulsory insurance as the cost of cover (if policies can be found) would be prohibitive, especially if it had to be in line with the Directive. 

Under Article 5 of the Directive, any type of vehicle can be removed (derogated) from the insurance requirement by the Government. However, there would have to be a guarantee fund (MIB in the UK) or the state would have to guarantee claims from innocent victims. This could work with some low-risk machines (eg the ride-on lawnmower or child’s toy car) where the likely financial burden on the insuring motorist would be limited, but derogation would clearly be undesirable where risks and costs were potentially higher. 

Effective enforcement

If the judgment is implemented in full, effective enforcement is impossible and therefore a threat for all law-abiding motorists. On-road enforcement with police ANPR technology along with enforcement from the record using the Motor Insurance Database and DVLA’s database has been very effective. The number of uninsured vehicles on UK roads has halved over the last decade. This works because the vehicle-owning public understands the need to be insured for vehicle use on roads and public places and that there are strong measures in place to enforce this requirement.

Enforcement is threatened by the Vnuk judgment for the following reasons:

• Off-road accidents are now in scope. There is no easy way to enforce vehicles used on private land having insurance. It is also difficult to verify whether accidents have happened, increasing the potential for fraud.
• Many newly in-scope vehicles have no registration markings and there is, therefore no database to facilitate enforcement from the record. Continuous insurance enforcement would not be possible.
• It would be time-consuming and expensive for the police to check individually whether a vehicle is insured.
• If insurance of certain vehicles used on private land cannot be enforced, this will risk undermining the successful, existing enforcement programme and confuse the current clear messaging.

The final word

The government has launched a consultation on the options to amend motor insurance law in light of Vnuk. MIB has maintained a close interest in this issue and firmly supports the government’s preferred option for the law to be amended in line with amendments to the Directive proposed by the European Commission, which would limit the compulsory insurance requirement to vehicle use in traffic situations. Whilst not ideal, in that the definition of ‘vehicle’ would still be extended, it would mitigate many of the problems created by the judgment by largely excluding private land use.

The final word should be on Brexit. There is much about the Motor Insurance Directive that works well, especially to facilitate cross-border travel and cross-border claims resolution. Whatever the outcome in terms of UK law, it will be desirable for UK policies to still provide EU-level cover for driving in the EU. Even where the EU has implemented Vnuk in full and the UK has not, additional cross-border risks created by the judgment are low because cross-border travel generally involves traditional vehicles driving on roads, as now. I confess that I have not listened to the other Mr Vnuk’s rap music, but on motor insurance, and cross border travel in particular, we should stick to the status quo!

A version of this article appeared in Modern Claims Magazine in 3 April 2017.