Tuesday, 29 March 2016
A track record of delay and denial
Three years have elapsed since the Department for Transport consulted on the MIB agreements and was advised in no uncertain terms by a number of respondents that its proposals and the national law provision it is responsible for in this area was seriously flawed. Innocent motor accident victims risk being deprived of their full compensatory entitlement or denied it entirely because the UK’s domestic law implementation of the minimum standards of protection required under European law are so defective. See the accompanying post, Maladministration At The Department For Transport, for further analysis.
The Department for Transport’s narrative is that it is acting lawfully and promptly to address any infringements of European law. The following chronology is intended to present an accurate account of what has transpired, leaving others to draw their own conclusions.
· In February 2013: the New Law Journal published a series of four articles, On the right road? in which I exposed numerous failings in the way our national law provision for compulsory third party motor insurance transposes the European directive (2009/103/EC) on motor insurance (the directive). This sets the minimum standard of compensatory protection that members states must implement to protect motor accident victims. Its aim is to ensure that victims who sustain property damage or injury through no fault of their own should have their compensatory entitlement guaranteed. Unfortunately, over the years our national law provision in this area has become excessively complicated and inconsistent. The Road Traffic Act 1988 and other related primary and secondary legislation is peppered with loopholes that motor insurers regularly exploit to avoid or reduce their liability to compensate motor accident victims. These articles called for wide-ranging reform. They explained that a comprehensive EU law compliance review was required: not just of the primary legislation but also of the minister’s private law arrangements with the motor insurers he is tasked with regulating, to ensure that victims of uninsured and untraced drivers receive comparable level of protection to victims of fully insured drivers. These schemes are supposed to conform to the same European law minimum standards. They are administered by the Motor Insurers’ Bureau (MIB) owned and operated by the motor insurance sector. The MIB is funded indirectly by every premium paying motorist, so there is an element of consumer protection here too. The fourth New Law Journal article concluded by warning the Secretary of State for Transport that he could anticipate legal action if these extensive infringements of European law were not addressed.
· On 27 February 2013 the Department for Transport promptly announced a consultation on the Untraced Drivers Agreement 2003 and the Uninsured Drivers Agreement 1999. It asserted that the department had reviewed both agreements to ensure they are fully up to date with European law, a claim clearly belied what followed. Neither the proposed reforms nor the questions raised for consultation addressed the UK’s extensive nonconformity with the European law it is are supposed to implement. So the whole process was as flawed the announcement was misleading. A full report was promised for the end of July 2013.
· In early April 2013 I set up this NOTA BENE blog as part of a public awareness campaign targeted at claimant practitioners and representative organisations for accident victims. The legal profession was at the time preoccupied with crisis-managing the botched implementation of one of the largest civil justice reforms in living memory and so was largely unaware that this consultation was taking place. The blog flagged up important issues omitted from the consultation document. I was consulted by the Association of Personal Injury Lawyers, the Motor Accident Solicitor’s Society, RoadPeace and a number of law firms who joined me in calling for the minister to ensure that the minimum standards of compensatory protection required under the relevant European law was complied with fully.
· By late April 2013 various consultation responses were submitted by claimant representatives experienced in handling claims under both MIB schemes, including my own, all of which called for greater compliance with European law. In my consultation response I expanded on the issues raised in my New Law Journal articles and I identified and explained over 40 potential breaches of European law in our national law provision. My covering letter summarised my key proposals as follows:
“....In my opinion any proper review of the MIB Agreements cannot be undertaken in isolation from their statutory context. I explain my reasoning in my paper, where I also advance the following key recommendations:
· Restore the original legislative objective of the Road Traffic Act 1930 to ensure that all victims of motor vehicle users, who under our national law are entitled to compensation for their loss or injury, are automatically entitled to recover compensation from the responsible vehicle’s motor insurers, direct; wherever the accident occurs in the UK and whatever the circumstances of the incident. A victim’s right to compensation should be guaranteed and free from any policy term or other restriction in liability, which are issues that should be confined to the insurer / policyholder relationship.
· Our national law provision should adhere to the minimum standards of protection for victims of motor vehicle users imposed by the Sixth Motor Insurance Directive and Community law (which incidentally requires the full and comprehensive third party cover set out above).
· Codify the current mix of statutory and extra-statutory provision into one integrated body of rules (contained in primary and subordinate legislation) for victims of uninsured and unidentified drivers so that they provide a consistent, clearly articulated, fair and just compensatory regime for victims of insured, insufficiently insured, uninsured or unidentified drivers alike. The time for discarding the present anachronistic and highly partial arrangements has long since passed.”
· On 31 July 2013 the minister the issued a statement boldly asserting that the MIB agreements comply with European law. It also maked the odd assertion that ‘the agreements cannot be changed unless both parties agree’, as though the minister does not possess the executive power to fully implement European law. The statement ignored my recommendation that he substitute the anachronistic format of the MIB agreements with a modern codified scheme written in plain English that ordinary members of the public can understand. The MIB would not be able to veto a codified scheme. It is also here that we find the admission that the February 2013 proposals were the product of three years of negotiations with the MIB. Further discussions were said to be necessary and the date for delivering the consultation report was postponed to the Autumn of 2013.
· In the summer of 2013 the Law Commission asked me to submit a report (i) expanding on my four New Law Journal articles and (ii) setting out my recommendations for reform in this area. I duly submitted a detailed report, which I understand was forwarded to the Department for Transport. My report offered detailed proposals for reform, including the codification of the two compensatory schemes for victims of uninsured and untraced drivers and the imposition of standard terms for third party cover. On the latter point, the recent finding by HHJ Waksman UK Insurance Ltd v Holden & R & S Pilling trading as Phoenix Engineering  EWHC 264 (QB) that motor insurers are writing policy terms that do not even comply with the UK statutory minimum levels of cover, suggests that the Department for Transports failings are systemic. Unfortunately the department rejected the Law Commission’s offer to include this topic in its next programme of law reform.
· By the late summer of 2013, it was clear that the minister was not interested in widening the scope of his review. He rejected calls to enter into a dialogue with the various claimant representatives who had responded to his ill considered February 2013 consultation. After months of inaction, it became clear that the powerful motor insurance lobby had effectively blocked the calls for wider reform.
· On 6 August 2013 I filed a detailed infringement complaint with the European Commission. The complaint asked the Commission to attempt to persuade the Department for Transport to remedy the numerous infringements, rather than enforce compliance through legal action. The minister was duly notified. The Commission has been in regular contact with his department since that time in an effort to persuade the UK to remedy its extensive infringements of the Directive, voluntarily. The complaint has been updated as new infringements have come to light and these now exceed fifty separate instances grouped under ten different headings. A detailed schedule of European law inconsistencies is regularly updated and I am informed that copies have been supplied to the Department for Transport in its discussions with the Commission.
· On 6 February 2014 I wrote to the Department for Transport to advise it that the Untraced Drivers Agreement 2003 failed to provide adequate protection for children and the mentally incapacitated motor accident victims. I raised this in response to a particularly worrisome case that came to my attention. My research revealed that the MIB regularly settled children’s injury claims without first providing them with independent legal representation or providing any independent safeguards to ensure that the compensation offered by the MIB is fair and reasonable. On 12 March 2014 the Supreme Court ruled in Dunhill v Burgin  UKSC 18 that to be valid, a minor’s or protected party’s claim had to be approved by a court. On 17 March2014 I wrote to the Department for Transport with a link to my New Law Journal article An Untidy Arrangement?, drawing its attention to the Dunhill decision. The letter asked whether the minister intended to review the provision for children and mentally incapacitated claimants under both MIB Agreements and when we could expect his consultation report. Needless to say that the Department for Transport has not taken any action to protect these vulnerable individuals despite acknowledging the need for additional protection in its February 2013 consultation.
· On 3 June 2014 Mr Justice Jay criticised the department’s long standing failure to properly implement the European directives on motor insurance (i.e. the first three directives that preceded the present consolidated directive), in Delaney v Secretary of State for Transport  EWHC 1785 (QB). He ruled that the State was liable to compensate the victim whose claim had been rejected by the MIB who relied on an unlawful exclusion of liability clause in its agreement with the minister. He held that this particular infraction of European law was clearly and obviously unlawful at the time it was first introduced in 1999. The Secretary of State for Transport’s appeal was subsequently dismissed by the Court of Appeal in March 2015. This specific infringement had been highlighted by me in my 2013 consultation response.
· On 4 September 2014 the Court of Justice of the European Union posted its judgment in Damijan Vnuk v Zavarovalnica Triglav d. d.  (Case C-162/13) which stressed that the compensatory guarantee of third party victims is of equal importance to the Directive’s aim of liberalising the free movement of vehicles across the European Union. It also ruled that the third party insurance requirement that member states are responsible for implementing must extend to and cover ‘any use’ made of a motor vehicle on land that is consistent with the vehicle’s normal function. This applies not just to the duty to take out third party cover but also to the cover that motor insurers are supposed to provide. This contrasts sharply with the qualified and restrictive nature of the UK statutory provisions that confine the duty to insure and the cover provided to (i) use in public places and (ii) to vehicles intended or adapted for road use. Furthermore, motor insurance policies routinely impose unlawful restrictions on the use to which these vehicles are put. These defects had been flagged up as potential infringements in my New Law Journal articles and in my April 2013 consultation response. The implications of Vnuk could not have been clearer. Millions of motor policies continue to be issued that fail to conform to these basic minimum standards. The amendments necessary to bring the geographic and mechanical scope of the compulsory third party motor insurance requirement provided for under the Road Traffic Act 1988 are as obvious as they are straightforward.
· By the Autumn of 2014 the imperative for an urgent and wide ranging review of our national law provision for third party motor insurance was confirmed and incontestable. The Delaney and Vnuk cases demonstrate the high importance of protecting motor accident victims and they vindicate the repeated calls for reform made both in the responses to the minister’s own 2013 consultation and afterwards. It is to be assumed that similar representations would have been made by Law Commission and, on an ongoing basis, by the European Commission. The minimum standard of victim protection under this European law is simple, clear and unequivocal. Yet the minister allowed another year to pass by.
· In July 2015, presumably after further private discussions with the MIB, the department announced its proposed changes to the Uninsured and Untraced Drivers Agreements. The revised schemes were presented as a fait accompli; coming into effect on 1 August 2015. This involved revisions to the Untraced Drivers Agreement 2003 that clearly infringe the Directive on motor insurance. Also, despite assurances to the contrary in his 2013 proposals, no safeguards for children and protected parties were introduced. He also announced a new Uninsured Drivers Agreement 2015 that removed numerous redundant procedural conditions precedent to MIB liability; as originally proposed. However the new agreement introduces new provisions, presumably at the behest of insurers, that had not been raised in his 2013 consultation; worse still it adds new unlawful exclusions of liability that clearly and obviously conflict with the protective aim of the Directive. My New Law Journal article A call for (more) reform of 16 July 2015, points out these and other deficiencies. The accompanying statement studiously ignores the European law issues raised in response to the minister’s 2013 consultation, giving one the distinct impression that the consultation exercise was never intended to be anything other than window dressing.
· On 10 July 2015 I wrote an open letter to the Department for Transport to warn it that the revised schemes were badly flawed as they contained serious breaches of European law that unjustly prejudiced the legal rights of motor accident victims. Its response of 31 July 2015 was timed so it was transmitted precisely two and a half hours before the changes came into effect on 1 August. The letter simply refutes the problems raised without giving any explanation.
· The decision to ignore consistent calls for a wide ranging review in the face of the Delaney and Vnuk decisions is a significant watershed moment. Prior to this, it might have been conceivable, if not very plausible, to have argued that these unlawful actions and omissions were somehow inadvertent, even if not excusable. However, from this moment onwards, it is difficult to view the department’s inaction anything other than a deliberate decision to refuse to act in the full knowledge that this is unlawful. The department’s clear policy seems to be to confer numerous unlawful concessions to the motor insurers it is supposed to regulate at the expense of the accident victims whose interests this multibillion pound industry is supposed to serve; all this in open defiance of clear and unequivocal European law.
· In October 2015 a road safety charity issued a judicial review application against the Secretary of State for Transport. It challenges the minister’s decision to authorise unlawful revisions to the MIB Agreements and his failure to undertake a comprehensive and wide-ranging review of the UK’s compliance with the Directive. Although I have had an advisory role, I do not have the conduct of the case and I am not able to divulge any more information at present.
· In recent months the Department for Transport has indicated that it is considering undertaking a further consultation exercise on the implications of Vnuk. This is no answer for its failure over eighteen months to implement the more obvious implications of Vnuk: that require the immediate removal of the unlawful geographic and mechanical restrictions to the scope of the third party motor insurance requirement. Neither does it provide any excuse for its failure to remedy the numerous other unlawful provisions that were drawn to its attention in response to its own consultation and subsequently.
For those of us who have reached the reluctant conclusion that the 2013 consultation was a sham, the promise of further consultation is profoundly unconvincing. The lack of transparency and evident insurer partiality that informed the earlier process leads one to question the good faith of those involved. Even the offer of genuine bilateral consultation, were it to be made, is no answer to longstanding and egregious illegality.
Why the Secretary of State’s failure to implement European law is neither inadvertent nor excusable
A sham consultation
Just over three years ago the Department for Transport posted its February 2013 consultation setting out its proposals for revising the MIB agreements. Stephen Hammond MP was the Under Secretary of State for Transport who unwittingly lent his name to this ill-conceived paper. His covering letter stressed the importance he attached to ensuring that the MIB schemes ‘are fully up to date’ with European law.
The MIB agreements are the contractual arrangements between the minister and a consortium owned by the UK motor insurance sector: the Motor Insurance Bureau (MIB). They provide the legal framework for two separate schemes for ensuring that victims of uninsured and untraced drivers actually recover the compensation they are entitled to.
Unfortunately the consultation’s terms of reference were highly prescriptive both in the limited nature of the proposed changes and in the issues it raised. Whilst many of the proposals were welcomed (indeed for the removal of a raft of unfair and oppressive procedural strike out provisions was something that this author had been calling since 2008), much needed reform was overlooked. Unfortunately, rather than taking the European law minimum standards of compensatory protection for accident victims into account, it appears to have completely ignored them. The department later admitted, in an official announcement in July 2013, that its proposals were the product of extensive negotiations with the MIB over three years. It is clear from this and from what has subsequently transpired that a deal had already been struck with the MIB in private on the modest procedural changes that motor insurer’s were prepared to countenance. So, for this ‘consultation’ to have lived up to its description, it would also have needed to take into account the views of the various special interest groups who represent the road users and motor accident victims that these two schemes are supposed to serve; particularly where they identified substantial illegality.
What is striking about this exercise is that the department and the Under Secretary of State for Transport (who has since returned to backbench obscurity) were both warned by several respondents that the consultation was poorly conceived. They were told, in effect, that they were asking the wrong questions. Several well informed respondents warned that the review should not be confined to the procedural changes contemplated. They were advised that the department needed to undertake a root and branch review of the entire national law provision for third party motor insurance as well the compensatory schemes for victims of uninsured and untraced drivers: this needed to include the primary and secondary legislation governing compulsory third party insurance as well as both MIB agreements as they were closely interrelated and interdependent. It was explained that this was necessary because all this law, which the department is responsible for overseeing, contained unlawful provisions that conflict with the minimum standard of protection required under the relevant European law that the UK is obliged to implement. These were serious issues that were explained, at least by me, in exhaustive detail with reference to the primary and secondary sources of European and UK law.
Yet the department, and officially the minister, chose to ignore these responses. The department’s reaction was to park the entire review process; rejecting calls for a dialogue from the respondents. Nothing moved for over two years. It was evident that the 2013 ‘consultation’ had been an empty exercise.
Then in July 2015 his Department announced, as a done deal, its original proposals, with a few additional measures which had every appearance of emanating from the motor insurers who enjoy such a cosy working relationship with his department. The one concession to European law being the revision of an unlawful exclusion of liability following their most recent defeat in Delaney v Secretary of State for Transport  EWCA Civ 172 but even here some of the changes seemed contrived to deliberately mislead the unwary: in the way it reintroduces the illegal constructive knowledge provisions associated with one of the MIB’s exclusions of liability under the feeble guise of conformity: see ‘A call for (more) reform’.
This disingenuous behaviour undermines public confidence in the impartiality and good faith of those involved. There is a growing appreciation that we don’t have open and accountable governance, let alone efficient administration, at the Department for Transport. The minister responsible for this deplorable situation is the Rt. Hon. Patrick McLoughlin MP (the minister), who has presided over this shambles since 2012.
The chronology of obfuscation provided in the accompanying post, Action Not Words, speaks for itself.
The scale of the problem
Innocent motor accident victims continue to be routinely short-changed by ‘at fault’ motor insurers and the MIB, which these insurers own and run, because the minister has chosen to ignore calls to review the shambolic and anachronistic national law provision for compulsory third party motor insurance. In some instances innocent victims are left empty handed due to petty technical knock-out clauses that serve no purpose other than to provide insurers with windfalls.
This is a highly unsatisfactory situation. It is one that successive ministers have condoned for decades. However ignorance that might have been pleaded in earlier years, is unsustainable in 2016. It has been made increasingly obvious, undeniable even, that these anomalies are unlawful because they are not permitted under European law. The Delaney and Vnuk decisions referred to above, as well as other earlier authorities such as Churchill Insurance v Wilkinson and ors  EWCA Civ 1166, leave us in no doubt that the UK’s statutory and extra-statutory provision is inconsistent with the European law it is supposed to implement. In fact this problem is systemic as our national law provision in this area is not only riddled with illegal exceptions and restrictions but it also contains basic design flaws that are inimical to the original legislative objective of the Road Traffic Act 1930 of protecting accident victims.
Take for example the way the relevant legislation (The Road Traffic Act 1988; The European Communities (Rights Against Insurers) Regulations 2002; The Third Parties Rights Against Insurers) Acts of 1930 and 2010 and The Contracts (Rights of Third Parties) Act 1999 all preserve elements of the common law third party rule that expose accident victims to the vagaries of contractual restrictions in cover that they as strangers to the contract have no ability to influence. This makes no sense from a social policy perspective and it undermines the original 1930 legislative aim. Furthermore, under European law, a third party victim’s right to compensatory guarantee is a free standing right. This is one of those situations where the European law that our government is supposed to implement is not only clear, unequivocal and, for the most part, sensible but also much closer to the original policy aim that initiated compulsory third party insurance in this country 85 years ago.
It is little short of scandalous that our government encourages accident victims on its website to apply to the MIB direct, in the certain knowledge that its contractual arrangements with the MIB (and the schemes it operates) fail to confer their proper legal entitlement to the compensatory guarantee required both by common sense and European law.
Too little too late
Law abiding motorists and road users have endured three more years of what might most charitably be described as institutionalised incompetence at the hands of the complaicent technocrats at the Department for Transport. What they need right now is for the minister to step up to his constitutional responsibilities.
The time for deliberation and consultation has long past. The minister’s refusal to act promptly and decisively to bring UK national law provision into line strikes this author as Wednesbury unreasonable: in the sense that it is blatantly defiant of both law and logic, quite apart from being morally indefensible.
If the Department for Transport is unwilling or unequal to the task of assisting the minister in driving through this long overdue and necessary reform, then perhaps it would be better for all concerned if the Ministry of Justice assumed this responsibility.