26 October 2015The Road Traffic Act and your motor fleet insurance: change is on the way
The landmark 2014 ‘Vnuk’ court case from Slovakia will likely lead to significant EU-wide changes in road traffic legislation. What might it mean for your compulsory vehicle insurances?
Under the UK’s Road Traffic Act 1988, your duty to insure private or commercial motor vehicles has only extended to highways and wherever the public has access – and that motor vehicle is defined in section 185 of the legislation as “a mechanically propelled vehicle intended or adapted for use on a road”. Sounds simple enough – but it may be all about to change. When Damijan Vnuk was knocked off a ladder in a Slovakian farmyard by a trailer towed by a tractor reversing, he took the defendant to court and sued for damages.
The ramifications of the court case look set to redefine our laws for motor insurance, clarifying the dividing lines between employers’ liability, public liability and motor insurance. In this bulletin, we take a look at what it means for your business.
What happened next …
Mr Vnuk subsequently lost his case when the courts decided the tractor insurance did not cover damage caused when the vehicle was used as a machine or propulsion device rather than as a means of transport. Here comes the ‘but’:
- The Court of Justice of the European Union (CJEU) ruled that the duty to insure the use of vehicles – and the accident circumstances - fell within Article 3(1) of the EU’s First Directive on Motor Insurance.
- The duty to insure was applicable covering use of a vehicle consistent with its normal function.
The broad implications …
The case will very likely change the nature of risks and accidents covered by your motor insurance policies in off-road settings. Risks that were previously covered by your employers’ and public liability policies will now need to be covered by your motor insurance policy. Unless the UK government makes particular vehicle types exempt when it consults about the changes later this year or early in 2016, the changes to UK motor insurance law will then include a range of vehicles that don’t currently need to be licensed for road use that must comply with the Road Traffic Act. These additions could feature:
- Tractors and powered agricultural equipment.
- Quad bikes, forklift trucks and other man-riding equipment, cherry pickers and mobile cranes.
- Segways, mobility scooters and even sit-on lawnmowers.
In its broadest interpretation it could mean that any moving vehicle will need motor insurance, whether driven on private land, public land or public highways. And with that come extra costs, extra liability and extra risk complexity.
- Naturally this will affect many different businesses across many different commercial sectors and where relevant, the structure of your future motor fleet policies and the vehicles insured under those policies.
- The Department for Transport (DfT) is discussing the implications with the Association of British Insurers (ABI) to interpret and define which types of vehicles will need cover, in which situations and at what level. We’ll keep you posted on the results.
Some key considerations …
- If you don’t currently need Road Traffic Act compliant motor insurance for non-road vehicle applications, you may need it based on how the government responds.
- Clarity is important: you need to know why and the parameters of risk – plus cost-effective and competitive options that give you peace of mind.
- You may need newly compliant cover that replaces elements of your existing employers’ liability or public liability policies – effectively re-allocating risk from traditional liability policies to motor fleet.
- The transfer of that risk to the motor policy will actually give you greater cover because of the unlimited personal injury component.
- Assume the worst in your approach to the revised risk – that not having RTA-compliant cover for these new situations and applications will become a criminal offence.
The subtleties to watch for …
- While you will still be liable for instances of negligent driving by employees (on or off-road) motor policies must legally provide unlimited cover for personal injury claims - unlike your employers’ or public liability cover.
- All things being equal with the RTA realignment going ahead, you need to make sure your insurer is signed up to the Motor Insurers’ Bureau (MIB). MIB members pay in to a fund so that the MIB can settle claims caused by uninsured or untraceable third parties, a risk not covered by your normal basket of liability covers.
- Insurers covering off-road and specialist vehicle risk may not be MIB members so you need to check they are: a good broker will do this for you automatically.
- These changes will not be applied retrospectively and will only come into force after due consultation and amendment to the Road Traffic Act by Parliament.
- We expect that government will enact the changes by the end of 2016.
Here’s the view from the European Commission’s London office …
"The Commission understands concerns about this and wants to minimise cost and inconvenience – while ensuring accident victims are not left unprotected. The EU Motor Insurance Directive of 2009 allows EU member states to exempt certain categories of vehicle. So the Commission is working through this issue with a number of Governments, including the UK’s".
Source: This is Money / 07 April 2015 / Lawnmowers, mobility scooters and golf buggies could need costly motor insurance thanks to a new EU directive / Jane Denton
Arthur J. Gallagher: our conclusions …
A man falls off a ladder in central Europe – and the shockwaves are likely heading our way. The precise shape of the changes is not yet known - but we believe in preparing thoroughly. Take time to discuss your motor risk internally and with your broker: examine your vehicle applications, types and risks – then begin identifying those that look like they may come under the new regulations when they arrive. There will likely be financial implications for your premiums and how you manage employers’ and public liability and it’s worth getting an approximate grip on these in the meantime.
And if your understanding of ‘Vnuk’ and the Road Traffic Act leaves you a little unsure come and talk to us.
Download this Motor Fleet Insurance bulletin.pdf