Insurers win appeal in RTA case

28/08/12

On 24 August 2012, the Court of Appeal upheld an appeal by Churchill Insurance Company Limited ["Churchill"] from a decision of Blair J that had held a provision in the Road Traffic Act 1988 ["the Act"], permitting insurers in certain circumstances to recover moneys payable to road traffic accident victims, to be incompatible with EU law.  The Court of Appeal held that as long as the provision was operated proportionately and on the basis of the circumstances of the case, it would be compatible with EU law.

The case arose following an accident in November 2005, in which Mr. Wilkinson was injured.  He was a named driver on an insurance policy issued by Churchill.  Just before the accident, he gave permission to a friend, who he knew to be uninsured and who he knew had been drinking, to drive the car. That uninsured driver crashed the car and Mr. Wilkinson was seriously injured.  Section 151(8) of the Act 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.  Churchill sought to rely on that provision to allow them to recoup any moneys payable to Mr. Wilkinson.  He claimed that EU law prohibited such recoupment.  Blair J found in favour of Mr. Wilkinson.  The matter was appealed to the Court of Appeal,  which referred the matter to the Court of Justice of the European Union ["the CJEU"].  That Court held that although s.151(8) of the Act had  the effect of automatically excluding a passenger in the position of Mr. Wilkinson from the benefit of insurance and that such automatic exclusion was contrary to EU law, which obliges all passengers in motor vehicles to be protected by insurance cover, nonetheless 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.

When the matter returned to the Court of Appeal for determination, Mr. Wilkinson argued inter alia that the right of recoupment under s.151(8) of the Act was absolute and not dependent on any proof of fault on the part of the insured and that therefore to allow non-automatic and proportionate recoupment, as argued for by Churchill, would go contrary to the grain of the domestic legislation which could therefore not be construed in such a manner.  The Court of Appeal rejected this argument, finding that it was not against the grain of the domestic legislation for further conditions to be fulfilled in certain circumstances before an insurer could exercise its right against an insured passenger victim.

The Court of Appeal concluded, finding that s.151(8) of the Act should, in the light of EU law, be interpreted as if by the insertion of the following words in bold italics:

"(8)Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is not insured by a policy or whose liability is not covered by a security, he is entitled to recover the amount from that person or from any person who-

(a)is insured by the policy, or whose liability is covered by the security, by the terms of which the liability would be covered if the policy insured all persons or, as the case may be, the security covered the liability of all persons, and

(b) caused or permitted the use of the vehicle which gave rise to the liability save that where the person insured by the policy may be entitled to the benefit of any judgment to which this section refers, any recovery by the insurer in respect of that judgment must be proportionate and determined on the basis of the circumstances of the case".

The judgment is here.