Vnuk: increasing costs for businesses?

The Vnuk problem

The original case arose from an injury claim in which a Slovenian worker was knocked off a ladder by the trailer attached to a reversing tractor on a farm.  The ECJ ruled that as this vehicle was intended to be used on a road, it should be covered by the compulsory motor insurance regime under the 6th Motor Insurance Directive (MID).

More specifically, the decision was that compulsory motor insurance applied to any vehicle being used anywhere, for any purpose, for which it was intended.  Such a wide ambit encompasses all sorts of vehicles traditionally covered under EL and PL policies, for example agricultural vehicles, construction vehicles, forklift trucks, EBTs and driveable aircraft steps.

How this ruling is interpreted among European courts is up for debate and is currently being considered by the EC. The outcome will have significant ramifications for the general insurance arrangements of corporates.

Action plan

A much-awaited action plan from the European Commission (EC) on how to deal with the ramifications from the European Court of Justice (ECJ) decision in Damijan Vnuk v Zavarovalnica Triglav remains elusive, much to the frustration of governments, insurers and businesses across Europe.

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October deadline for responding to REFIT review of European motor insurance

The European Commission has just started a review of the legal regime of compulsory motor insurance put in place by the Motor Insurance Directive EC/2009/103 (the MID). The review is the wider REFIT evaluation of all aspects of the MID and is open for responses until 20 October. It therefore runs in parallel with the shorter four week consultation about the inception impact assessment (IIA) for the MID, about which we posted this blog last week.

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Commission option three appears favoured by stakeholders

It has been little over a month since the Commission released its eagerly anticipated road map setting out possible options to deal with the potentially complex consequences of the Vnuk decision. Although setting out four options, the road map which is entitled ‘Adaptation of the scope of Directive 2009/103/EC on motor insurance’ seems to lean in favour of a modest but important change to the Sixth European Motor Insurance Directive (MID). This is the third of four options identified by the Commission.

Since publication of the road map, we have held two well-attended meetings with insurer customers and stakeholders from the motor sport industry to consider views, share opinions and outline next steps. There was, as one would expect, some speculation at the meetings about how the workings out of the UK’s decision to leave the European Union might affect both the current handling and ultimate resolution of the Vnuk dossier. Nonetheless and in line with our preliminary thinking, option three – amending the MID to limit the need for compulsory motor insurance to the use of vehicles in traffic – looked very much to be the preferred choice.

Of course, there is uncertainty about what the exact wording of the proposed amendment to the MID would be. The Commission suggests that use of a vehicle in traffic could be defined as the transport of persons or goods, whether stationary or in motion, in areas where the public has access in accordance with national law. The present wording of the Road Traffic Act 1988 requires cover for use on “a road or other public place”. Quite how this phrase fits with the Commission’s suggested definition will dictate the scope of any amended required to the RTA once the positon at EU level has been confirmed.

As to timelines for amending the MID, it would seem that by summer 2017 is a possibility, but deadlines on Vnuk have slipped before … and there is some irony, perhaps, in the road map’s statement, nearly two years after the case, that “a swift response at EU level is warranted.”

One outcome we are keen to avoid for the post-Vnuk amendment being caught in the wider REFIT exercise (see, for example our December 2015 post about REFIT here). However, if this does get caught up with REFIT there could be considerable delay.

The immediate next step seems to be for the Commission to confirm its preferred option following the road map’s publication. It has set out Q3 2016 as its target date. We, like many others, await developments with interest.

Portrait photograph of Alistair Kinley, Director of Policy & Government Affairs

Alistair Kinley is director of policy and government affairs at BLM.

Vnuk – constructive solutions to minimise claims risks

I thought Alistair Kinley made a very valid point, in his earlier article of 13 August, calling for constructive solutions to the Vnuk problem. There needs to be a balance drawn between the protection of victims of accidents arising out of motor vehicles and the potential scope, post-Vnuk, of compulsory third party motor insurance (TPMI). Notably, TPMI will be required to cover use of vehicles, off-road, that may result in a contrived or potentially unworkable insurance solution.

Motorsport is an obvious example. At present, motorsport events that occur off-road are not subject to TPMI. Authorised motorsports events are licensed by the sport’s governing body through permits that extends public liability (PL) and personal accident cover for participants and event organisers. However this PL cover does not cover driver-to-driver liability. With this PL risk, post-Vnuk, potentially transferring over to a TPMI risk, not only does this give rise to some interesting liability questions, such as, how does one assess liability in a driver-to-driver collision when racing, but also fundamentally, with unquantified exposure, will there will be any appetite from motor insurers to underwrite the sport in the first instance?

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