European Union: Motor Insurance Directive: European Parliament Releases Draft Report On REFIT Consultation

Last Updated: 15 November 2018
Article by Mark Hemsted

Most Read Contributor in UK, November 2018

The European Parliament has set out its response to the REFIT review carried out by the European Commission in respect of proposed changes to the scope of the Motor Insurance Directive ("MID").

The report proposes that vehicles which are intended for use 'in traffic' should require compulsory motor insurance even "when outside traffic".

The proposal also specifically states that motor sports events should not be subject to compulsory motor insurance requirements under the MID.

Background

In June this year, the European Commission published its response to the REFIT consultation on the Motor Insurance Directive, which commenced in 2017.

Amongst other issues, the most contentious was that of the scope of compulsory motor insurance.  The MID requires "insurance against civil liability in respect of the use of motor vehicles," but does not define 'use'. 

The case of Vnuk extended the scope of 'use' to any activity consistent with the 'normal use' of the vehicle regardless of the location, including private land.  The ruling Vnuk and other decisions resulted in the Commission proposing to codify these rulings by amending Article 1 of the MID.

This proposed amendment defined the 'use of a vehicle' as:

"...any use of such vehicle, intended normally to serve as a means of transport, that is consistent with the normal function of that vehicle, irrespective of the vehicle's characteristics and irrespective of the terrain on which the motor vehicle is used and of whether it is stationary or in motion."

European Parliament draft report

The report sets out the following notable proposals:

Scope of compulsory insurance requirements

Regarding the scope of the compulsory insurance requirements, the inclusion of the following paragraph after the currently defined requirement of ensuring "insurance against civil liability in respect of the use of motor vehicles."

"Member States shall ensure, when a vehicle is required to hold insurance pursuant to the first paragraph, that the insurance is also valid and covers injured parties in the case of accidents beyond a vehicle's normal use in traffic."

However, the proposal also states that: "Member States may adopt limitations on this coverage in respect of use outside normal use in traffic, where they consider that such coverage would go beyond what can be reasonably expected from a motor insurance."

The Parliament justifies the inclusion of this by stating that: "Once a vehicle has an insurance because it will be used in traffic on public or private roads, insurers should be required to cover those vehicles even when outside traffic. The validity of the insurance policy should not depend on its use".

The given example is of a farming tractor never used in traffic not requiring motor insurance, yet those tractors who do use a road should have valid insurance irrespective of whether on the road or in a field.

In respect of the definition of 'use', the Parliament has proposed a slightly altered definition (changes from the Commission's proposal highlighted):

"use of a vehicle' means any use of such vehicle in traffic that is, at the time of the accident, consistent with the vehicle's function as a means of transport, irrespective of the vehicle's characteristics and irrespective of the terrain on which the motor vehicle is used and of whether it is stationary or in motion."

The Parliament's justification is that "the use of term "traffic" should not effect the notion that both use of a vehicle on public and private roads, driveways, parking lots, etc. continue to be covered by this Directive."

Motorsports

There is proposed exclusion for those "vehicles intended exclusively for motorsports". In recent days, there have been a number of news reports that all motorsports would be made impossible by the new rules.This inclusion would assuage those fears, albeit Member States would retain the ability to decide whether motor insurance coverage is required for events there.

The report highlighted concerns that the risk of insuring motor sport events risked increasing premiums for normal vehicle users.

Techonological/environmental advances

Interpretation of the recent jurisprudence could mean "new types of motor vehicles such as electric bicycles and segways" would require compulsory cover.It is stated that this would be disproportionate and "would also undermine the uptake of these vehicles and discourage innovation."

The report thus proposes that the MID be limited to those vehicles which are subject to an EU-type approval under any appropriate Regulation.

What can we learn?

  • The report is clear that 'in traffic' is not limited to public roads, but also "private roads, driveways, parking lots" and is not limited to the "vehicle's characteristics and irrespective of the terrain".  Thus, the proposals codify those recent European Court of Justice decisions on dual function vehicles (Rodrigues) and immobilised vehicles (Juliana), and make clear that the vehicle function at the time of any accident should be that of a means of transport for the MID to apply
  • The insurance industry can be cautiously optimistic about the content of the draft report, as the proposals will clear up some of the existing confusion. However, the agreement on the content must be reached with the Commission first
  • In respect of technological advancements such as autonomous vehicles, the report states it is too early to "adjust the logic of motor vehicle insurance". However, upon circumstances where it is necessary, the "Directive should be... subject to a full review in light of technological developments like self-driving vehicles," which appears to be a sensible proposal. It is unclear at what stage of the development of autonomous vehicles that such a review would take place
  • Regarding the proposal that EU-type approved vehicles be subject to compulsory insurance cover, the Parliament's rationale for such a move is that "most non-type approved vehicles are small in size and therefore the chance of significant damage to persons or property is limited". Their benefit to the environment is also cited as a justification. It would be interesting to note whether this position would change in the event of evidence showing that vehicles should as electric bikes or Segways carry a greater risk of causing significant damage to persons or property

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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