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Rights against insurers

With effect from 19 January 2003, a new direct right of action against an insured defendant’s motor insurer is available under regulation 3 of the European Communities (Rights against Insurers) Regulations 2002 (EC(RI)R 2002 ). However, this statutory right only arises where there is an existing cause of action against an insured defendant. It does not replace the need to establish the traditional cause of action, but is an ancillary remedy.

By regulation 3(2) of the EC(RI)R 2002 an:

‘….entitled party may, without prejudice to his right to issue proceedings against the insured person, issue proceedings against the insurer which issued the policy of insurance relating to the insured vehicle, and that insurer shall be directly liable to the entitled party to the extent that he is liable to the insured person.’

The new right is subject to a number of restrictions:

  • (a)
    The injury or loss must arise out of an ‘accident’.
  • (b)
    The accident must have been caused by or arise out of the use of a ‘vehicle’. Regulation 2(1) defines a ‘vehicle’ as being:
    • ‘…any motor vehicle intended for travel on land and propelled by mechanical power, but not running on rails, and any trailer whether or not couple, which is normally based (within the meaning of paragraph (2) of this regulation) in the United Kingdom.’
  • As might be expected, there are similarities here to the definitions employed in the Road Traffic Act 1988(RTA 1988) at ss 141A and 193, which also exclude tramcars and trolley vehicles.
  • (c)
    The claimant must be an ‘entitled party’. This is defined by regulation 2(1) as meaning:
    • ‘any person who is a resident of a Member State; or a resident of any other State which is a Contracting Party to the Agreement on the European Economic Area…and the Protocol.’
  • Accordingly, the claimant must be a UK resident or resident in a Member or Contracting State. An American tourist would not have a direct right of action under these regulations.
  • (d)
    There must be a cause of action against an ‘insured person’. Regulations 2(1) and 3 define an insured person as being someone with a policy of insurance that covers the use of the vehicle on a road or other public place in the UK, by the insured person (including a cover note) that fulfils the compulsory insurance provisions of s 145 of the RTA 1988.
  • (e)
    The cause of action must lie in tort . The law of tort includes also deliberate acts of interference, such as assault and battery.
  • (f)
    The accident must have occurred on a road or other public place within the UK. The terminology is similar to the RTA 1988 definition of a road in s 192(1) and as such extensive case law already covering this topic will be of relevance.
  • (g)
    The new direct right of action became effective on 19 January 2003 and it applies to all current causes of action.
The direct right of action is consistent with the reality of everyday practice in which road traffic insurers assume a lead role in the investigation and negotiation of claims. However, although it may appear to offer an alternative, more direct method of pursuing a claim, it will be recalled that it is only a supplemental right. The primary cause of action must still be established and so must be pleaded. If there is doubt about entitlement to invoke the direct right of action, the safe course is to proceed conventionally against the insured driver, at least in the alternative.

In defending a direct right of action claim, an insurer may rely on any defence that its insured could plead against the defendant. Under the regulations, the insurer is only liable ‘to the extent that he is liable to the insured person’.

Furthermore, an insurer can avoid liability under the direct right (as distinct from the primary liability of its insured), if it can show that one or more of the criteria set out above are not satisfied. For example, an insurer might argue that the insurance policy was void. If acting for the claimant, the defendant’s motor insurer should be asked either to concede the applicability of the direct right, or explain any defence on the issue within the pre-action protocol period. Needless to say, if the insurer has a legitimate defence to the new direct right, then the claim will proceed against the defendant driver responsible, without inclusion of the insurer as a co-defendant.

Although the statutory restrictions on some contractually imposed exclusions of liability under s 148 of the RTA 1988 still apply, the protection afforded by s 152(1)(c) to (2) does not apply to the direct right of action against a motor insurer. Accordingly, it is conceivable that a claim might succeed under the common law where it fails under the new direct statutory right of action (where, for example an insurer has cancelled the policy but has failed to comply with s 152(1)(c)). In the circumstances, care should be taken to ensure that notice of commencement of proceedings under s 152(1)(a) is served on the insurer in every road accident claim where an insurer has been identified and the driver responsible is to be a party to the proceedings. This said, it is possible that the direct right of action may rescue the claimant where a s 152 notice has been overlooked.

Where a motor insurer has made a clear admission as to its contingent liability under regulation 3 of the EC(RI)R 2002, then it may be more expedient and cost effective to proceed against the insurer alone. In these circumstances and for the purpose of establishing liability, the Particulars of Claim need simply refer to the negligent actions of the driver responsible (as opposed to naming him as a party), allege the facts and matters relied upon to establish the direct right of action against the insurer/defendant, and refer to the insurers’ admission before proceeding to specify the loss and damage sustained thereby. In such a scenario, the tortfeasor is relegated to a mere witness.

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