European Union: Motor Insurance Regime Considered In Advocate General Opinions

Last Updated: 2 May 2018
Article by Clyde & Co LLP

Most Read Contributor in UK, November 2018

Fundo de Garantia Automovel v Juliana (Case C-80/17) and Smith v Meade, (Case C122/17)

Advocate Generals of the European Court of Justice have recently offered opinions on two cases referred to the European Court of Justice (ECJ) regarding the application of the Motor Insurance Directives (MID).

Whilst the cases await full judgment from the ECJ, opinions of the Advocate General are usually followed by the ECJ.

Fundo de Garantia Automovel v Juliana deals with the issue of whether a vehicle left immobilised on private land still requires compulsory motor insurance.

Smith v Meade addresses whether or not an insurance company is required to compensate an individual for a failure of a national government to transpose an EU directive correctly, resulting a loss for that individual.


Mrs Juliana owned a vehicle, which due to medical problems, she could no longer drive. The vehicle, whilst roadworthy, was left uninsured in her yard. Her son took the vehicle from the yard, and was involved in a collision killing him and two passengers.

The Portuguese compensation body (their MIB) paid out compensation, and then sought to recover the same from Mrs Juliana, arguing that the vehicle should have been insured. Mrs Juliana disagreed as she had taken it off the road, and did not intend driving it.

The Supreme Court of Portugal referred two questions to the ECJ:

  1. Was Mrs Juliana required to insure the vehicle?
  2. Despite not being responsible for the collision and the vehicle having been removed from her property without her consent after being immobilised, did the compensation body have a right of subrogation against Mrs Juliana?

The opinion of Advocate General Bobek recommends the ECJ finds as follows:

  1. The MID must be interpreted as requiring that a vehicle, immobilised on private land at the owner's choice, is still subject to compulsory insurance requirements, unless formal steps have been taken to deregister the vehicle officially (the UK equivalent would be declaring the vehicle off the road to the DVLA). If a vehicle is deregistered, then any liability to insure becomes an issue for the member states;
  2. The compensation body has a right of subrogation against the party responsible for the collision, having removed the vehicle from the owner's private premises when immobilised, subject to any conditions member states may apply to that liability. In this set of circumstances, the compensation body would not have a right of subrogation against Mrs Juliana.


Mr Smith was travelling in the back of a van, which did not have seats in the rear for passengers, or seatbelts. Mr Smith was very seriously injured when the van was subsequently involved in an accident.

Mr Smith brought proceedings in Ireland for his injuries. The insurance policy covering the vehicle was provided by FBD Insurance. The policy of insurance provided that "passenger cover only operates for the one passenger seated on the fixed seat in front of the vehicle," effectively excluding Mr Smith's claim.

The terms of the policy conformed to the requirements of Irish legislation at the time that the policy was taken out. FBD therefore refused to deal with the claim.

The ECJ decision of Farrell (C356/05) in 2007 found that the Irish Government had incorrectly transposed the Directive, with the consequence of excluding claims for passengers not travelling on fixed seats.

Mr Smith's claim was therefore reopened upon the direction of the High Court of Ireland, and settlement was agreed between FBD and Mr Smith for €3 million. FBD were subrogated to the rights of Mr Smith for that payment and sought to recover from the Irish state.

FBD argued that the retrospective application of the decision in Farrell by the High Court of Ireland placed upon it an obligation which was actually owed to Mr Smith by the Irish state.

The Court of Appeal of Ireland referred two questions to the ECJ:

  1. Whether the Court of Appeal was required to disapply the legislation incorrectly transposing the Directive for the purposes of the subrogated action;
  2. Whether FBD had the responsibility of compensating Mr Smith as a result of the failure to transpose the Directive correctly:

The opinion of Advocate General Bot was as follows:

  1. The Court of Appeal is required to disapply those provisions which were contrary to the Directive;
  2. FBD, having ensured their policy complied with the provisions of Irish law as it stood (albeit contrary to the appropriate Directive) cannot have responsibility for compensating a claimant for damage which was not covered by the policy at the relevant time.

It therefore follows that the Irish state should therefore be responsible for reimbursing the sums paid out by FBD to settle Mr Smith's claim.

What can we learn?

  • The application of the MID continues to be addressed on a case by case basis, and the judgments in Juliana and Smith will have an effect irrespective of whether or not the Advocate General's opinion is followed.
  • The opinion in Smith will be welcomed by insurers as preventing possible retrospective effect against them as private bodies, in circumstances where they have followed the legislation of the member state, who misinterpreted the requirements of a Directive. In such circumstances, the correct action for the claimant is against the member state for Francovich damages.
  • The opinion in Juliana follows the current position in the UK regarding the insurance of 'immobilised' vehicles. Unless a vehicle is declared off the road with the DVLA by use of a SORN, then it is subject to Continuous Insurance Enforcement (CIE) legislation, where it is an offence to be the keeper of a vehicle without insurance.
  • The opinion in Juliana also leaves open the question of liability as to what happens when an accident involving an immobilised and uninsured vehicle occurs on private land. This could be answered by considering the decision in Vnuk, which was interpreted as requiring compulsory insurance for any vehicle used on private property, however further guidance may be needed.
  • The Vnuk decision resulted in a consultation by the UK Government on amending the domestic law on motor insurance. Following responses in December 2016, and the publication of a summary of those response in July 2017, there has been no further movement on the review.
  • The European Commission's own consultation on the Motor Insurance Directive closed in October last year, yet any progress has not been made public as of yet. The Commission's website indicates that summary of responses will be published at an as-yet undetermined time.
  • The outcome remains uncertain, yet we have previously set out that we consider it is more likely the MID will be restricted in scope, as the " driving in traffic" exception favoured by insurers, is likely to be enacted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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