31/07/2017

The scope of the EU Motor Insurance Directive would be amended to “apply only to accidents caused by motor vehicles in the context of traffic”, under the Dept for Transport’s preferred option for preventing the Vnuk Judgment of the European Court of Justice from standing UK motor insurance law on its head. 

The ‘Vnuk judgment’ traces back to an accident on a Slovenian farm in 2007, in which Mr Damijan Vnuk was knocked off a ladder by a tractor-drawn trailer. In 2014, the case came before the ECJ, which ruled that the Directive requires a vehicle to have third party insurance “when its use is consistent with its normal function”.

The judgment brings a host of vehicle types ranging from fork-lift trucks and ride-on lawn mowers to electric pedal cycles, golf buggies and ride-on children’s toys within the scope of the directive. It also makes it necessary for vehicles used on private land to have 3rd party cover.

This ECJ interpretation of the directive went against the understanding of the UK and several other member states. The European Commission also recognised that it had generated potentially costly consequences and challenging issues – including some which the UK Government “firmly believe were unintended when the Directive was drafted”.

Consequently, in June 2016 the Commission set out 4 options in an Incept Impact Assessment for reviewing the directive. These formed the basis of a consultation published by the Dept for Transport in December last year and included the ‘amended directive option’ (Option 3) preferred by the department.

The summary of consultation responses available at ‘Motor insurance: consideration of the ‘Vnuk judgment” reveals that 72% of a significantly larger than average number of consultation respondents agreed with the Dept’s view.

94% of respondents stated that the option of accepting the Vnuk judgment and doing nothing would be “worse than the current position on motor insurance in the UK”.

Common concerns across the options included enforcement challenges, a likely increase in fraud, the potential need to amend the Statutory Off-Road Notification (SORN) scheme and the unviable cost of insuring motor sports.

An additional complication is that the Commission has still not decided whether it will adopt Option 3, never mind the detail of the amendments that will be made. Meanwhile, the UK must comply with European law – even if determined by the Vnuk judgment – until it ceases to be a member of the EU.

When asked whether a sunset or review clause should be added to any new regulations, more than 50% of respondents favoured a review clause, 20% a sunset clause and approximately 25% believed neither was necessary.