With just over two months to go until major changes to the Road Traffic Act 1988 (RTA) come into force, we are urging all motor insurers to move quickly if they need to obtain a post-accident declaration from the court to avoid the statutory obligation to meet third party judgments.
We issued a newsflash to our clients in early July setting out the changes to the RTA and the equivalent Road Traffic Order for Northern Ireland - both amended by the Motor Vehicles (Compulsory Insurance) (Miscellaneous Amendments) Regulations 2019.
The reason for the update and reminder of the 1 November deadline is that we have just successfully secured a declaration in less than two months - from start to end of proceedings - for one of our motor insurance clients. Our clear message to the industry is that there’s still time to act, if you do so promptly.
1 November regulation
Part 3 of the Regulations, which take effect on 1 November, removes the statutory right of motor insurers to rely on a declaration obtained after an accident.
The transitional arrangements include a saving provision confirming that providing insurers successfully obtain declarations before 1 November – rather than merely commencing an action for a declaration before that date – they will continue to be exempted from any statutory obligation to satisfy judgments that might otherwise have arisen under the legislation. It is worth repeating that merely commencing the action before 1 November will not be enough - the declaration has to be obtained before then to have effect.
Part 2 of the Regulations also removes the two (now largely historic) alternatives to compulsory third-party motor insurance that had been available under the legislation, namely a deposit or a security. Transitional arrangements allow existing deposits and securities to survive until 1 November 2021.
Our latest success
My colleagues in our catastrophic injury team, Andy Hibbert and Phil Sturley, have just experienced first-hand that statutory declarations can be secured in less than two months even as we move closer to the 1 November deadline.
In their case, our client insured a vehicle which was involved in the accident that caused very serious injuries to the claimant. After the accident, it emerged that the driver obtained his insurance policy fraudulently by impersonating someone else. The insurer found out when the person being impersonated contacted them to say he had never taken out a policy.
We applied to the court for a declaration, under s.152, to be entitled to avoid the policy. This was granted and the client was relieved of any obligation to meet unsatisfied third party claims under the RTA. There was no dispute from the driver of the vehicle which led to a swift resolution of our client’s involvement. The consequence is likely to be our client not having any exposure to a £10m multiple defendant case.
As time is running out for insurers to benefit from these declarations BLM has mapped UK court turnaround time and capacity to deal with these cases. It was critical that we chose the right court to deal with this case which also had a connection to the claim. Given our geographical footprint with offices all over the UK and Ireland we were able to choose one of the courts that had a short turnaround time and that was local to a BLM office. In this way we were able to leverage our relationships with the local court staff to ensure the documents were delivered personally to the right people to prevent any delay.
Although only two months remain until 1 November, motor insurers with grounds to avoid motor policies should act immediately to obtain declarations to relieve them of any obligations under s.152 RTA. As this case shows, it is possible to start new declaration proceedings and have them finalised within that remaining window.
Claims handlers would be well advised to expedite any pending actions involving avoidance, remembering that if a declaration is challenged, this could delay the court's decision in whether to grant one at all - and certainly before the 1 November deadline.
It is important to recognise that the Regulations in no way affect the entitlement of insurers to avoid the potential liability arising under s.151 RTA where cancelling policies before an accident, pursuant to s.152(1)(c).
To discuss this further or if you would like any support for your declarations, including information about our map of UK court turnaround time, please don't hesitate to contact me or a member of the team.