Dispensing with the insured
District Judge Neil Hickman explains why the insured tortfeasor who causes a road accident may disappear as defendant
The European Communities (Rights against Insurers) Regulations 2002 SI 02/3061 (ECRAIR), in force from 19 January 2003, make some modest but significant improvements to the rights of motor accident victims.
They form part of the implementation of the Fourth Motor Insurance Directive.
The regulations apply to any claimant who is a resident of an EU member state or of Iceland, Norway or Liechtenstein.
This means that they will not benefit a claimant who is resident in, say, Australia or the US and who has the misfortune to be injured while visiting those countries on holiday.
UK accidents
They relate to accidents which occur on a road or other public place in the UK 'caused by, or arising out of, the use of any insured vehicle'.
'Insured' for this purpose means that a policy is in force which satisfies section 145 of the Road Traffic Act 1988.
'Vehicle' is defined to mean a motor vehicle or trailer which is registered, or normally based, in the UK and which does not run on rails.
So it appears that ECRAIR will not help a client who is hit by a foreign-based lorry or a Croydon tram.
Where a claimant has a claim in tort arising out of such an accident he may issue proceedings against the insurer of the vehicle, and the insurer 'shall be directly liable to the entitled party to the extent that he is liable to the insured person.' How does that compare with the rights which the claimant has under the existing law?
Insolvent tortfeasors
The Third Parties (Rights against Insurers) Act 1930 gives a claimant a direct claim against the defendant's insurers where the defendant is insolvent.
It operates by transferring to the claimant the defendant's right to proceed against the insurer.
It is generally accepted that this Act requires reform and a consultation paper on the subject was issued last September.
Under the 1930 Act, the claimant must establish the defendant's liability before he can turn to the insurer (Post Office v Norwich Union [1967] 2 QB 363, CA), so he must generally issue two sets of proceedings.
His rights under the 1930 Act also depend on the insolvency of the policyholder.
Unsatisfying tortfeasors
Section 151 of the Road Traffic Act 1988 requires insurers to satisfy certain judgments.
This obligation is hedged about with a number of technicalities.
There must of course be a judgment against the policyholder.
It must relate to a compulsorily insurable liability.
The insurers must be given notice of the bringing of the proceedings against their policyholder not later than seven days after the commencement of them (section 152(1)(a)).
Claims direct
Under ECRAIR, there is a direct claim against the insurer.
So there will be one set of proceedings, not two.
There is also a right to obtain insurance details from a central database.
You will not need to bother about whether the defendant is insolvent.
In those respects, the claimant's rights under ECRAIR are wider than those under the 1930 Act either now or following the Law Commission's proposed reforms of it.
They are procedurally simpler than those under section 151.
Section 148 of the Road Traffic Act 1988 avoids a number of common policy conditions as against a third party.
So, for example, a failure to notify will not avail the insurer.
It may, of course, prove expensive for the policyholder.
Similarly, under European law an insurer may be precluded from relying on certain contractual clauses as against a third party victim - see re Bernaldez, [1996] All ER(EC) 741.
However, subject to those provisions, it is important to note that the insurer will be able to raise against the claimant any defence which he could have raised against his policyholder.
The result of a case like Churchill Insurance v Charlton [2001] EWCA Civ 1230 would, it seems, be the same.
In that case, the policyholder deliberately damaged the claimant's vehicle, inadvertently injuring the claimant.
The accident took place in a car park not on a road, so section 151 did not apply.
It was held that, for public policy reasons, the policyholder could not recover against the insurers in respect of his deliberate act.
The unfortunate claimant, seeking to rely on the 1930 Act, could be in no better position and would have fared no better under ECRAIR.
After 19 January, one should always consider whether the claimant falls within ECRAIR.
If so, it will generally be sensible to issue the proceedings against the insurer.
If there is a doubt as to whether the insurer will be indemnifying the tortfeasor, take a belt-and-braces approach and sue the tortfeasor as well.
Reps, interest and the Motor Insurers' Bureau
Every motor insurer will have to appoint a claims representative in every European Economic Area (EEA) state.
This is being enforced by the Financial Services and Markets Act 2000 (Variation of Threshold Conditions) Order 2002 SI 02/2707, also in force from 19 January.
As a result of the directive, the insurers of any EEA registered vehicle will also have to appoint UK claims representatives.
The directive requires that there should be a direct right of action against them.
Article 4(6) requires that where claims are not met or a reasoned offer made within a stipulated time, insurers must pay interest.
Arguably, this is already the effective position under UK law in many cases by virtue of the personal injury protocol, but the Financial Services and Markets Act 2000 (Fourth Motor Insurance Directive) Regulations 2002 (SI 2002/2706) makes the position clear.
The requirement is imposed on UK insurers via the Financial Services Authority (FSA).
Interest will be at 4% over base rate - 'sufficiently high to be an effective deterrent but not so high as to be penal', according to the FSA.
There will be a central register of insurance details under the Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003 SI 03/37, again in force on 19 January.
The Motor Insurers Information Centre (MIIC) database will be searchable on payment of a modest fee.
The MIIC will also have a duty to cooperate with the corresponding information centres in the other EEA states, so that your client who is hit by the tourist in the Trabi should be able to find out which UK claims representative to approach.
The role of the Motor Insurers' Bureau is extended by these regulations.
It will have to compensate UK residents who suffer accidents elsewhere in the EEA involving untraced or uninsured drivers.
So stand by for more increases in premiums.
District Judge Neil Hickman sits at Milton Keynes County Court
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