The latest motor insurance decision from the Court of Justice of the European Union (CJEU) concerns the extent to which the compulsory insurance obligation set out in the Motor Insurance Directive applies to vehicles on private property in circumstances in which the owner does not intend to drive them on the road.
The facts of Juliana
The defendant, Mrs Juliana, was the owner of a vehicle registered in Portugal. She had stopped driving owing to ill health and had left her vehicle parked in the yard of her property ie on private land. She had therefore not insured it but nor had she taken any formal steps to withdraw it from use.
The vehicle was unlawfully taken by her son, ie without her permission or knowledge. He drove it on the road and was responsible for an accident which resulted in his death and that of his two passengers. The claimant - the Portuguese Guarantee Fund - met claims of over €400,000 from the passengers’ families. It then sought reimbursement from the defendant as owner / keeper of the vehicle notwithstanding that:
(i) she was not the driver or user at the time of the accident
(ii) she had not her caused or permitted the uninsured use of the vehicle, and
(iii) no civil liability attached to her.
The defendant argued that she was under no obligation to maintain insurance, having elected not to use the vehicle and having parked it on private property. It is important to recognise that, had there been no obligation for the owner to insure her vehicle in those circumstances, there would have also been no obligation on the fund to provide compensation to the passengers’ families.
The dispute reached the Portuguese Supreme Court, which referred the following questions to the CJEU.
1. Must Article 3 of [the First Directive] be interpreted as meaning that the obligation to take out motor vehicle civil liability insurance extends even to situations in which the vehicle is, by the owner’s choice, immobilised on private land, and not on public roads?
Must it be interpreted as meaning that in those circumstances, the owner of the vehicle is not under an obligation to insure, regardless of the liability of the Fund … to third party victims, in particular in cases of unauthorised use of a motor vehicle?
2. Must Article 1(4) of [the Second Directive] be interpreted as meaning that the Fund … which, because there was no… insurance contract, paid the relevant compensation to the third party victims of the traffic accident… has the right of subrogation against the vehicle’s owner, regardless of whether that owner was responsible for the accident?
Must it be interpreted as meaning that the subrogation by the Fund ... in relation to the owner depends on the prerequisites of civil liability…, in particular the condition that, when the accident occurred, the owner had actual control of the vehicle?
The decision of the CJEU
On 4 September 2018 the Court ruled that the imposition of the compulsory insurance obligation relating to ‘vehicle(s)’ (within the meaning of Article 1(1) of the 1st Motor Insurance Directive (MID) [72/166/EEC], and defined by reference to ‘any motor vehicle intended for travel on land...’) was “independent of the [actual] intention of the owner of the vehicle or of another person actually to use it.” [The decision is available here.]
The Court adopted the Advocate General’s (AG) opinion delivered in April and recognised that the reference to intention in Article 1(1) (as underlined above) must logically refer to the objective purpose of the vehicle and not to the subjective intent of the user (whether the owner or anyone else having control over the vehicle).
Both the AG and the Court appear to have been influenced by the fact that the scope of the obligation to insure motor vehicles must, for the sake of legal certainty, be determined objectively and in advance of any accident and cannot depend on the actual intention of the user to use the vehicle.
The Court held that a vehicle which is registered and therefore has not been officially withdrawn from use, and which is capable of being driven must be regarded as falling within the definition of a vehicle at Article 1(1). It must therefore be regarded as subject to compulsory insurance.
The question of whether there was an obligation to take out compulsory insurance could not depend on whether or not a motor vehicle falling within the Article 1(1) definition was actually being used as a means of transport at a given time. [However, it would appear to follow from Rodrigues de Andrade [C 514/16] that if the Article 1(1) vehicle was not being used as a means of transport at the time of an accident then the motor insurance policy would not be engaged.]
In answering the second question referred, the Court held that the regime in the Directive did not preclude national legislation that provides for a compensation body to bring an action against a vehicle owner who has failed to comply with the insurance obligation (whether in addition to, or in substitution of, suing the person(s) responsible for the accident), even despite the absence of any civil liability on the owner.
It is worth reflecting that the Portuguese Supreme Court had regarded this very outcome as “disproportionate”. Given that no civil / tort liability attached to the vehicle owner, that may be a view which would resonate with UK insurance stakeholders.
What this means for you: impact and practical consequences
The case is clearly a further example of the Court’s maximalist approach to the scope the of compensation provided by the compulsory motor insurance obligation in the Directive, as may be seen at its paragraph 28: “…if it were held that a person in the situation of Mrs Juliana was not subject to that obligation, that would mean, according to the referring court, that the Fund does not have to provide compensation”.
That said, the decision does not, without anything further, change UK motor insurance law.
What it does is to make clear that the Directive has to be interpreted as meaning that a vehicle which remains registered (and, therefore, has not officially withdrawn from use) and is capable of being driven, will not cease to be subject to the compulsory insurance obligation simply because the owner no longer intends to use it (and parks it on private property).
To the extent (if any) that this interpretation differs from the scope of the Statutory Off Road Notification (SORN) scheme which exists in the UK it may create a need to amend the SORN scheme in order to comply with the Directive as now understood. This point is now likely to require close scrutiny by the UK authorities. It is yet another awkward technical aspect of motor insurance law which
(a) will have to be addressed alongside the recommendations put forward by the Commission following its REFIT review of the Directive, and
(b) may play into consideration of the UK’s future motor insurance arrangements both before and after leaving the EU next March.