Brexit’s Impact on Workplace Vehicle Insurance in the UK
When a work vehicle is involved in an accident, insurers must determine whether the claim falls under the employer’s liability/public liability (EL/PL) policy or the motor policy. Often, these policies stipulate that motor insurance covers incidents requiring compulsory motor insurance.
Insurers then assess if the accident circumstances mandate compulsory motor insurance according to the Road Traffic Act 1988 (the Act). Sections 143 and 145 of the Act mandate compulsory motor insurance for third-party liabilities arising from vehicle use on a road or public place in Great Britain.
The definition of ‘road or other public place’ (with ‘other public place’ added in 2000) and ‘use of’ a vehicle have been the most contentious parts of the Act. The Act itself doesn’t define ‘other public place’, and the term isn’t used consistently within the Act.
The Pre-Brexit Position
Before Brexit, Article 3 of Directive 2009/103/EC (Sixth Motor Insurance Directive) required member states to ensure that civil liability for vehicles normally based within their territory was covered by insurance.
The European Court of Justice (ECJ) was asked in Vnuk v Zavarovalnica Triglav [2016] to address discrepancies between Slovenian law and this Directive. The ECJ ruled that compulsory insurance was needed for any vehicle consistent with its normal function, irrespective of whether it was on public or private land. This didn’t align with the Act and caused issues for the motor insurance market.
While the UK Parliament didn’t amend the Act to reflect Vnuk, the courts generally followed the ECJ’s decision, setting a precedent.
The Post-Brexit Landscape
The Motor Vehicles (Compulsory Insurance) Act recently completed its parliamentary stages and will soon come into effect. This Act, which has cross-party support, was introduced following an analysis of the costs associated with updating the Act after the 2017 RoadPeace v Secretary of State for Transport and MIB decision.
The new Section 156A will nullify any retained EU law, effectively returning to a pre-Vnuk stance. This means compulsory motor insurance will once again be required for a more limited range of vehicles on roads or public places, not including private property.
The insurance industry has welcomed the new Act, with the Motor Insurers’ Bureau (MIB) stating:
Motorists will no longer be faced with the additional costs, relating to future accidents on private land and accidents involving a range of extra vehicles – including lawnmowers and golf carts…[this] will save all motorists money and take us back to the common-sense approach we had before the Vnuk ruling in 2014.
Implications for EL/PL Insurers
From an EL/PL perspective, the new legislation is expected to reduce the number of situations where compulsory motor insurance applies to accidents involving work vehicles. This is particularly relevant for EL claims, as the majority of motor-related accidents are on private premises involving plant machinery.
If EL/PL insurers continue to exclude vehicle-related accidents only where compulsory motor insurance applies, they may find they can’t exclude as many incidents. They may need to consider amending their exclusions or adjusting premiums to account for the increased risk of covering work vehicle accidents.
Implications for Motor Insurers
Motor insurers will find relief with this legislation. Because the UK Parliament did not amend the Act following Vnuk, the courts intervened. The decision in Lewis v Tindale and others [2019] meant that Vnuk directly impacted every UK motor insurer.
The Motor Vehicles (Compulsory Insurance) Act 2022 returns to the previous status quo, where motor vehicle insurance is required to cover third-party losses arising from accidents on a road or public place. Vehicles solely operating on private land shouldn’t need specific motor policies.
Motor policies no longer need to be written to cover vehicle use on private land (e.g., within a business’s yard or car park). Such accidents will be covered by EL insurance if the use arises out of employment.
Insurers, businesses, and consumers may benefit from a clearer definition of policy risk. Commercial motor premiums could decrease. The clarity should also reduce coverage disputes between EL and motor insurers, potentially leading to further savings over time.
