Motor insurance shake-up to affect most UK businesses

Landmark court case will have far-reaching consequences for businesses across all sectors in the UK. Policyholders must act now to be prepared. James Harvey of BLM explains.

To some, Vnuk may seem nothing but an unknown acronym. In fact, it’s the name of a landmark Europe-wide court case that’s set to change the future of motor insurance. It’s because of this case that the UK government will very soon have to change the rules about motor insurance law to bring it in to line with the judgement.

The Vnuk case addressed what accidents and risks have to be covered by compulsory motor insurance, and will affect your business’ insurance arrangements, regardless of the sector in which you operate.

The Vnuk case

On 13 August 2015 it was exactly eight years since a tractor knocked over the ladder on which Damijan Vnuk was standing while loading hay into the upper floor of a barn in rural Slovenia. He sued the tractor driver for compensation for his injuries. Eight years on, the ramifications of his claim are still shaking up insurance laws across the EU.

This imminent change will affect insurance arrangements of a huge number of businesses operating in a vast array of sectors. It will impact retailers, manufacturers, leisure companies and hoteliers, not to mention utility organisations, waste management, logistics, constructionand the motorsport industry to name just a few.

We are advising policyholders to act now to ensure they are prepared for the transfer of risk affecting their insurance arrangements. This is because some of the incidents currently covered under employers’ liability (EL) and public liability (PL) insurance policies will have to switch over and be picked up by a motor policy. The current Road Traffic Act will have to be amended in Parliament.

When is a ‘vehicle’ not a vehicle?

The law change is very likely to bring into scope a range of off-road vehicles and situations that would not previously have been included in motor policies, unless the Government makes a special exemption for specific types of vehicle when it consults about the changes. We expect that to take place later this year.

This essentially means that any vehicles used in off-road settings will now require insurance cover that complies with the Road Traffic Act. We’re talking about bringing vehicles such as motorised wheelchairs, mobility scooters, quad bikes, pallet trucks, forklift trucks, diggers, bulldozers, vehicles used to transport goods within warehouses and even floor cleaners in use throughout factories under the umbrella of your motor (fleet) policy.

Government to move quickly

Although there is no change in underlying claims risk – corporate insureds will remain liable for their employees’ negligent driving, whether on or off-road – the insurance differences are important. Unlike EL and PL policies, motor policies legally have to provide unlimited cover for personal injury claims. Also any insurer offering a policy for Road Traffic Act risks has to be a member of the Motor Insurers’ Bureau (MIB) and has to pay in so that the MIB can meet claims caused by uninsured and untraced motorists – a cost that EL and PL insurers don’t have. Not all insurers currently covering off-road and special vehicle risks are members of the MIB.

The changes outlined here will not take effect until the Road Traffic Act is amended in Parliament and will apply only for claims happening after that. But we expect things to move fairly quickly and for the Government to start consulting about how to make the changes well before the end of this year. The consultation is expected to start later in the year and should be regarded as a great opportunity for insurers and other stakeholders to put forward constructive solutions. Following the consultation, it is entirely possible that the Act could be altered in the first half of 2016.

James Harvey is partner at insurance and risk law business, BLM

James Harvey