As widely anticipated, new regulations were laid before Parliament on 1 July, removing the right of insurers to obtain a declaration of avoidance following a road traffic accident. The regulations will enter into force on 1 November 2019.
The Motor Vehicles (Compulsory Insurance) (Miscellaneous Amendments) Regulations 2019 amend both the Road Traffic Act 1988 (RTA) and the equivalent Road Traffic Order for Northern Ireland in the same way.
Part 3 of the Regulations, when enacted, shall remove the statutory right of motor insurers to pursue a declaration after an index accident endorsing any entitlement to avoid their insurance policies, and any statutory liability potentially attaching – under either section 151 of the RTA or Article 98 of NI Order – that requires insurers to satisfy judgments against, generally, at-fault drivers.
The transitional arrangements include a saving provision confirming that providing insurers successfully obtain declarations before 1 November 2019 – rather than merely commence 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. Merely commencing an action for a declaration before 1 November will not be enough - it 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 them to survive until 1 November 2021.
What this means for you
Motor insurers that have sufficient grounds to avoid their motor policies should act immediately to pursue declarations under s.152 RTA, given that the change – entering force on 1 November 2019 – requires insurers to have obtained a declaration by this deadline (which is only four months away and includes the long summer break). Naturally, any delay may defeat the likelihood of successfully obtaining a declaration in time, notwithstanding the merits. Claims handlers would be well advised to expedite any pending actions involving avoidance.
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):
“No sum is payable by an insurer under section 151 of this Act if before the happening of the event which was the cause of the death or bodily injury or damage to property giving rise to the liability, the policy… was cancelled by mutual consent or by virtue of any provision contained in it.”
The explanatory note confirms that the changes introduced by the Regulations “address failures of national law to operate in accordance with EU law”. This has been evident – insofar as the changes concern an insurer’s right to avoid policies for non-disclosure or misrepresentation – since the judgment of the Court of Justice of the European Union in Fidelidade-Companhia de Seguros SA [C-287/16], which holds that a motor insurer may not invoke the nullity of its policy against third-party victims. In light of that tension, the Secretary of State for Transport undertook – following Roadpeace v Secretary of State for Transport  EWHC 2725 (Admin) – to amend s.152 of the RTA because of this incompatibility with European law, a change now introduced by these Regulations.
 Reference within the Explanatory Note to “Regulation 8 [being] a saving provision for any court declarations obtained prior to 1 November 2021” seems to be an error intended to relate only to Part 2 [removal of securities and deposits] and not Part 3 [insurer’s right to avoid an insurance policy].