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Clarity Ahead? The Motor Insurance Directive and the European Council’s Proposals to Amend

By Peter Allchorne


Published 15 January 2020


In December 2019, the European Council agreed the text of the proposal to amend the Motor Insurance Directive 2009/103/ECUK (MID). What are the major proposals to the Motor Insurance Directive and what impact could they have on future motor insurance claims?\n 

Last month (December 2019), the European Council agreed the text of the proposal to amend the Motor Insurance Directive 2009/103/ECUK (MID), which had been put forward by the European Commission in May 2018, ahead of final negotiations.

Anyone involved with motor insurance policy coverage will be aware of the issues that have arisen in recent years.  Namely, the contradictory requirements of the European Union, contained in the Motor Insurance Directive, and domestic legislation, as set out primarily in the Road Traffic Act 1988.

A significant number of cases, including those of Vnuk and Rodrigues de Andrade, which dealt with the issue of the “use” of a vehicle which required insurance, have come before the domestic and European courts. [See DACB Article on Vnuk here].  These decisions have highlighted not just the differences between these two sets of legislation, but have also led to debate at a European level as to the unintended consequences of the wording of the Motor Insurance Directive.  Hence, the need for the Motor Insurance Directive to be refined and clarified.

The major proposals to the Motor Insurance Directive include:

  • Use” is to be defined as: "any use of such vehicle as a means of transport, that is, at the time of the accident, consistent with the normal function of that vehicle, irrespective of the vehicle's characteristics and irrespective of the terrain on which the motor vehicle is used and of whether it is stationary or in motion."
    • Note that the proposal makes no reference to the use of a vehicle “in traffic”, which had been in the definition proposed previously by the European Parliament.
  • Vehicle” is be defined as:
    • any motor vehicle propelled exclusively by mechanical power on land but not running on rails with:
      • a maximum design speed of more than 25 km/h, or
      • a maximum net weight of more than 25 kg.
    • any trailer to be used with a vehicle referred to in point a), whether coupled or un-coupled

Wheelchair vehicles which are intended to be used exclusively by the physically disabled would not be considered a “vehicle”, even were they to otherwise satisfy the proposed definition.

Light electrical vehicles such as PLEVs (Personal Light Electrical Vehicles), the usage of which is expected to increase, and which do not meet the proposed definition, are also to be excluded.

  • Motorsport vehicles are to be exempted from the Motor Insurance Directive, on condition that the Member State ensures that the organiser has an alternative insurance or guarantee policy covering the damage to any third party, including spectators and other bystanders.
    • This is narrower than the proposal of the European Parliament, which had been to provide a complete exclusion for vehicles used in motorsport events.
  • Limited derogations are to be permitted in respect of restricted areas to which unauthorised persons should not enter, for instance location-specific areas and equipment at ports and airports, as long as appropriate measures are taken to ensure that compensation is paid in respect of injury or loss caused by such a vehicle.

  • The practice of avoiding compulsory cover arising from the use of the vehicle as a means of deliberately causing damage, or reclaiming from the tortfeasor, is permitted. However, Member States should ensure that the injured person is still compensated, for instance by way of an alternative compensation mechanism or guarantee. 

  • Claims against insolvent insurers, involving cross-border provision of insurance services, will in the first instance be paid by the compensation scheme of the member state in which the victim resides, to then be reimbursed by the compensation scheme of the home state of the insolvent insurer.

The proposed amendments certainly provide us with some clarity.  It is notable that it is effectively the definition of “use” as clarified in Vnuk et al by the ECJ that is to be adopted, which is dependent on the “normal function” of the vehicle as a means of transport.  However, we anticipate that there will still be scope for satellite litigation regarding the “normal function” of some vehicles and whether they are effectively being used “as a means of transport.

The Council has proposed that once agreement on amendments has been reached, they will come into force two years later.  Whilst the UK is likely to have left the EU by then, it is probable that it will want to place itself on an equal footing and maintain regulatory alignment with the EU.