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Appeal judges set new rules on insurers’ liability to vehicle owners injured by uninsured friends

Recovery from injured passengers must be 'proportionate'

29 August 2012

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The Court of Appeal has set new rules on insurers’ liability to vehicle owners injured by uninsured friends.

Under Section 151(8) of the Road Traffic Act 1988, insurers liable to pay compensation to injured owners are entitled to recover it where the victim had “caused or permitted the use of the vehicle” which gave rise to the liability.

Lord Justice Aikens said the “practical effect” of the section was that an insured passenger victim of the negligent driving of an uninsured driver they had allowed to drive the vehicle was “excluded, or omitted” from the benefit of compulsory motor insurance.

The court heard that Mr Wilkinson’s parents bought him a car, insured by Churchill. He let his friend Mr Fitzgerald drive him back from McDonalds, despite knowing he was uninsured. Fitzgerald, who had been drinking, drove the car into an oncoming vehicle and Wilkinson was seriously injured.

In a linked case, Tracy Evans let her friend Adam Cockayne drive her motorbike, and travelled as a pillion passenger. Cockayne drove into the back of a lorry and Evans was seriously injured.

Delivering the leading judgment in Churchill Insurance v Fitzgerald and Wilkinson [2012] EWCA Civ 1166 and Evans v Cockayne and Equity Claims [2012] EWCA Civ 1166, Lord Justice Aikens said the Court of Appeal asked for a preliminary ruling from the ECJ on two questions on the effect of various European motor insurance directives.

Aikens LJ said the “principal answer” was that the directives precluded national rules which had the effect of omitting automatically the requirement that an insurer should compensate a passenger who is the victim of a road traffic accident.

He said the claimants, the insurers and the secretary of state for transport all agreed that Section 151(8) could be interpreted in a way which made it compatible with the directives, though it would involve the “notional addition of some wording”.

The claimants argued that wording should be added to ensure that insurers could not recover compensation they might be required to pay to insured passengers.

The insurers and secretary of state for transport argued that words should be added to Section 151(8)b to ensure that any recovery by the insurer must be “proportionate and determined on the basis of the circumstances of the case”.

Lord Justice Aikens accepted this argument.

“The claimants argued that the section creates a ‘no fault’ right of indemnity, whereas the interpretation of the insurers and secretary of state would turn it into a right dependent on establishing fault or applicable only after making other qualitative assessments,” he said.

“I cannot accept this argument of the claimants. Section 151(8) in fact demands that two pre-conditions be fulfilled before the insurer has the right to an indemnity from the insured.

“It has to be shown that the insured ‘caused or permitted the use of the vehicle’ and that the use of the vehicle ‘gave rise to the liability’. So I think it cannot be against the fundamental principle of section 151(8) to require further conditions be fulfilled in certain limited circumstances before the insurer can exercise the right (to whatever extent may seem proportionate) against an insured passenger victim.”

Aikens LJ allowed both appeals, to the extent that followed from his interpretation of Section 151(8) b. Lord Justices Etherton and Maurice Kay agreed.

Ian Pennock, barrister at ParkLane Plowden Chambers in Leeds, said the Court of Appeal ruling was still potentially liable to further challenge at the ECJ under the directives.

“Previous jurisprudence seems to be of the view that such an insured victim should not be deprived of any compensation even where they know they were allowing an uninsured person to drive the car”.

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Road traffic