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Liability of Motor Insurers to Innocent Victims of Road Traffic Collisions

The scope of s. 151 of the Road Traffic Act 1988 was the subject of the judgment of Tugendhat J in the case of Bristol Alliance Limited Partnership v Williams (1) EUI Limited (2) [2011] EWHC Civ 1657 (QB), handed down last week. 

In the early hours of 12 December 2008 a car driven by D1, Mr Williams, collided with the House of Fraser store in Cabot Circus, Bristol, causing in the region of £250,000 of damage to the store.    Mr Williams was insured at the time by EUI Limited operating under the name of Bell, a division of Admiral.  The case was brought in the name of the owners of the store as a subrogated claim by the property insurers against, initially, the driver.  Mr Williams admitted negligence.  EUI, his motor insurer, applied to be joined to the proceedings to enable it to argue that it should not be obliged to satisfy any judgment against Mr Williams because the damage had been caused in the course of a suicide attempt by its insured.  EUI relied on a clause in the policy purporting to exclude liability on the part of the insurer for deliberate acts by the insured. 

On 16 and 17 June 2011 the court heard argument addressing a preliminary issue of whether EUI would be liable to satisfy a judgment in favour of the innocent third party victim of the accident, regardless of whether it was entitled to decline to cover Mr Williams under the terms of the policy. 

Tugendhat J found in favour of the Claimant that, regardless of the deliberate act exclusion clause in the policy, EUI was obliged to satisfy the judgment obtained by Bristol Alliance against Mr Williams.  EUI had issued Mr Williams with a Certificate of Insurance certifying that he held insurance that complied with the minimum requirements of the Road Traffic Act 1988.  It was argued on behalf of Bristol Alliance that the statutory minimum insurance that a driver is required to have under s. 143 of the Act, the scope of which is contained in s. 145, must cover the driver for deliberate acts (following the reasoning of the Court of Appeal in a line of cases concluding in Charlton v Fisher [2002] QB 578).  In light of this the policy must be construed in such a way that, although the deliberate act clause might operate against the insured preventing him from obtaining the benefit of the policy, it would not prevent an innocent third party victim obtaining satisfaction of a judgment against the insured from his insurer under s. 151 of the Act.  This reasoning was accepted by the Court. 

The Claimant argued secondly that if the Court held that s. 151 of the Act could not be interpreted under the conventional rules of construction in order to give rise to the above result, it should be construed purposively (Marleasing SA v La Comercial Internacional de Alimentacion SA C-106/89 [1990] ECRI-4135), so far as possible, to give effect to the five EU Motor Insurance Directives that were in force at the time.  Taking into account the contents of the Directives (in particular A3(1) of the First Directive, A1(1), A1(4) and A2(1) of the Second Directive) and the decision of the ECJ in Case C129/94 Bernaldez [1996] ECR I-1829, Part VI of the 1988 Act must be interpreted as requiring the user of a motor vehicle to be insured under a policy that satisfies the minimum requirements of the Directives and any exclusion clauses that purport to restrict the ability of the innocent third party victim to recover from the insurer should be construed as having no effect. 

Tugendhat reached his conclusion as a matter of domestic law but went on to consider, obiter, the position under EU law.  He rejected arguments on behalf of EUI that the Claimant could not be considered to be a victim because the claim was subrogated and, further, that the decision of the ECJ in Bernaldez should be read as applying only to purported exclusion clauses relating to drivers who are intoxicated.  He concluded that if his decision under domestic law was wrong, then the Claimant’s arguments concerning the effect of the Directives on the interpretation of the 1988 Act would succeed.

In practice, this issue does not arise in most cases where a motor insurer purports to restrict recovery under the terms of the policy as a result of the conduct of its insured, because it is usually required to meet the victim’s claim as Article 75 insurer when the victim exercises the entitlement to recover damages from the MIB under the MIB Uninsured Drivers’ Agreement.  The scope of s. 151 arose acutely in this case because the MIB scheme excludes recovery in subrogated claims.  The judgment does contain however an interesting analysis of the scope of the minimum insurance requirements of the Road Traffic Act and (obiter) of the effect on this of the EU Directives. 

John Ross QC and Laura Johnson acted for the successful Claimant.

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