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fraudulent credit hire claims

Judy Dawson Discusses Recent Caselaw on Insurance Indemnity Issues Arising Out of Unidentified Drivers

Monk v Warbey – the 1935 authority revisited twice in quick succession in the context of insurers liability.

Judy Dawson discusses the impact on insurers on two recent decisions relating to Monk v Warbey liability of a person who gives permission to another to drive a car and such driver was uninsured and whether their insurers have a liability to satisfy the judgement.

There have been two recent decisions before the Courts in which Claimants had suffered loss from road traffic accidents. In both cases the decision appears to have been taken to pursue somebody other than the driver of the vehicle at the time. In both cases this appears to have been taken because the driver was unidentified. Those acting for Claimants would do well to remember the Untraced drivers’ agreements and the ability of such victims to recover their damages through that route, rather than assume that litigation against insurance companies will always provide the best source of compensation.

 

The First Instance Decision

In Allen v A Mohammed and Allianz Insurance [2016] it was found that the First Defendant had lent her car to another (the identity of whom was not revealed) who had subsequently negligently collided with the Claimant causing him loss. The untraced driver was not insured and the Claimant chose to issue proceedings against both the owner of the car who had lent out her vehicle to an uninsured driver and her insurance company. The Claimant successfully argued in the first hearing that the First Defendant (owner) was liable to the Claimant due to her breach of statutory duty pursuant to the principles elicited in Monk v Warbey [1935] 1KB 75 [CA].

The Claimant framed his case against the Second Defendant in two ways. The first was pursuant to the European Communities (Rights Against Insurers) Regulations 2002. Such claim was fundamentally misconceived as only a cursory glance at the Regulations would confirm. (Indeed I have previously obtained a wasted costs order against a solicitor’s firm who had brought a claim pursuant to such Regulations whilst accepting that the driver was not the person insured pursuant to the policy). Such Regulations stand out in my experience as a piece of succinct drafting; it must be one of the few Regulations where the person responsible was of such intellect and experience that he or she produced a comprehensive detailed draft which can be contained on 2 pages of A4.

Such Regulations impose a direct liability to a Claimant on an insurer “to the extent to which it is directly liable to the insured person”. Such phrase is of course fatal to any claim where the tortfeasor is not insured under the policy.

The second way in which the Claimant framed his case against the insurer was equally, in my view, misconceived however it found favour with the Judge. The Claimant averred that the insurer was liable pursuant to the Road Traffic Act 1988. I will not go into the convoluted reasoning which was urged upon and subsequently adopted by the Judge. The Judge recognised that it was a novel point and gave the Second Defendant permission to appeal on this point however I suspect such appeal will not proceed (the claim was worth under £10,000) and it turned out (I suspect unbeknown to the parties or Judge in Allen which was heard on 9th September 2016) that precisely the same point was already being heard in the Court of Appeal on 15th November 2016 in the case of Sahin v Havard and Riverstone Insurance (UK) Ltd (formerly Brit Insurance).

 

The Court of Appeal Authority

Judgement in the Sahin case was given on 29th November 2016. That case also involved a person who decided to lend out the car for which she was insured and responsible to another person who remained unidentified. In this case Ms Havard had in fact hired the vehicle from a hire company and the agreement and the insurance covered only her own use of the vehicle. The amount in issue was large (Mr Sahin’s claim included credit hire of over £100,000) and it was apparent that a judgement against Ms Havard personally was likely to be of little use to the Claimant. It is noted in that case that originally a claim was filed under the Uninsured Driver’s Agreement but this was for some reason not proceeded with. Due to the way the matter proceeded which included an application to add Ms Havard’s (the hire company’s) insurer, two questions came before the Judge namely;

  • Whether Ms Havard’s liability to Mr Sahin was a liability required to be covered by section 145 of the 1988 Act;
  • Whether Ms Havard’s liability was in fact covered by the terms of the insurance policy.

The Court of Appeal answered both question in the negative, approving the decision of the Judge at first instance.

The first question was highly significant in that if Ms Havard’s liability was a liability pursuant to section 145, then the insurer would have to satisfy the subsequent judgement against her pursuant to section 151 of the 1988 Act. Pursuant to section 145, the insurance policy had to cover any

“liability which may be incurred by [her] … in respect of … damage to property caused by, or arising out of, the use of the vehicle on a road.” “liability which may be incurred by [her] … in respect of … damage to property caused by, or arising out of, the use of the vehicle on a road.”

The Court of Appeal therefore contended that the question was whether “use of the vehicle” in section 145 included “permitting or causing another to use the vehicle”. Counsel for the Claimant (somewhat optimistically) contended that using a vehicle included permitting somebody to use a vehicle. His difficulty was compounded by the fact that section 143 of the Act specifically deals with the use of a vehicle and then separately permitting somebody to use the vehicle, thereby suggesting (as would linguistics in any event) that permitting the use is different to using. If it was not then part b of section 143 would be unnecessary.

The Court reviewed the previous case law on the definitions of use of a vehicle, noting the various elements of control that were seen to be necessary, and concluded that permitting the use of the vehicle was not the same as using it. Insurers will no doubt note with some relief that the judgement referred to the Defendant’s Counsel’s submission that “Insurance for failing to ensure that there is insurance is an oxymoronic concept for which it would be impossible to assess a premium” (not that the commercial problems of insurance companies have ever before particularly concerned the Courts).

The Court therefore held that section 145 did not require insurance cover by a policy holder against liabilities incurred by reason of somebody else using the vehicle and therefore section 151 did not operate to make the insurer liable to satisfy the judgement obtained against her pursuant to Monk v Warbey.

 

Summary

What is clear therefore is that in the case where a Claimant is injured by an untraced driver, the Claimant may be able to get judgement against the policyholder/owner of a vehicle pursuant to Monk v Warbey but the relevant insurer does not have to satisfy such judgement. In the majority of cases therefore, the Claimant would be best directed to obtaining compensation pursuant to the Untraced drivers agreements.

 

The Future

On 8th December 2016, the Court of Appeal was again being asked to revisit this point in another case involving an attempt to construe the European Communities (Rights Against Insurers) Regulations 2002 and the Road Traffic Act 1988 to impose liability on insurers for the acts of untraced drivers.

Judy Dawson is a specialist in insurance indemnity matters and regularly acts for and advise insurance companies in relation to such matters.

 

Contact Judy’s clerks

Francine Kirk on 0113 202 8605

Talia Webster on 0113 213 5207