Insurance companies may limit payments to victims of car accidents in particular cases

06/12/11

Although the automatic exclusion of compensation to victims of road accidents was not compatible with EU law, insurance companies could limit the amount of compensation paid to such victims following an assessment of the particular circumstances of the case, the Court of Justice of the EU held in a recent ruling on a preliminary reference from the Court of Appeal of England & Wales.

Section 151(8) of the Road Traffic Act 1988 permits insurers, who are obliged under the statute to pay compensation in respect of a person not insured by a policy, to recoup that amount from a person who was insured and caused or permitted the use of the vehicle which gave rise to the liability. In the present case, Mr. Wilkinson who was insured through Churchill Insurance, permitted a friend who he knew to be uninsured and drunk, to drive his car. The uninsured driver crashed the car and Mr. Wilkinson was seriously injured. Churchill admitted that it was liable to compensate Mr. Wilkinson under the public policy provisions of the 1988 Act, but relied on section 151(8) to refuse payment, on the basis that it was entitled to recoup any moneys paid out. The matter was heard by the High Court and Court of Appeal from where a preliminary reference was made to the CJEU.

The CJEU held first that, following the position reached by the Court of Appeal, the domestic provision in question had the effect of automatically excluding a passenger in the position of Mr. Wilkinson from the benefit of insurance. Such automatic exclusion was contrary to EU law, which obliges all passengers in motor vehicles to be protected by insurance cover. The only exceptions thereto were set out in the relevant Directives and applied to drivers and additionally inter alia to passenger who knowingly allowed themselves to be carried in a vehicle knowing the same to be uninsured. However, the CJEU went on to hold that national rules could restrict compensation in such cases as the present where such restriction was operated proportionately and on the basis of the factual assessment of the individual cases.

The judgment is here.