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Department for Transport publishes Vnuk consultation on options for amending domestic insurance law

Until yesterday the most recent development in the Vnuk saga was the publication in June of the European Commission “Roadmap” which made suggestions for the possible adaptation of Motor Insurance Directive 2009/103/EC in light of the Vnuk decision. We reviewed the suggestions put forward in the Roadmap in our article Assessing and addressing the impact of Vnuk and the DfT subsequently confirmed that it would consult “in due course” on plans for implementing the decision.

Yesterday afternoon the consultation was published. The foreword highlights the Government’s disappointment with the judgment and the challenges in addressing it. The Government acknowledges that it’s a decision that it “must, by law, recognise and take account of” but it has serious misgivings about the extent to which the judgment has broadened the scope of the Directive and the potentially costly consequences it has generated.

The Government is considering two options:

  • “The comprehensive option” reflects European law as determined in the Vnuk judgment. The Government is uncomfortable with this option which would result in a broadened definition of a motor vehicle so that more vehicles are within scope and an extension of insurance requirements beyond roads and other public places.

  • “The amended Directive option” is based on the European Commission Roadmap and is the Government’s preferred option. As we highlighted in our article, suggestion 3 – limiting the scope of the Directive to “traffic” – was the most developed suggestion and the one closest to current UK legislation. The Government wants to focus on this suggestion for the purpose of the consultation.

Whilst the latter option is the preference of the Government it is important to note that the change to the Directive is still currently only under consideration by the Commission. The consultation also highlights that either option will present a range of challenges including: enforcement, potential fraud and increased cost burdens.

The issue is also complicated by Brexit on which the Government says that “unless, and until, the Directive is actually amended, we are faced with a position where we must comply with European law as determined in the Vnuk judgment for as long as we are a member of the EU. Depending on the progress of EU exit negotiations, any regulations we make to comply with EU law could be time-limited.“

A Times article today reports that “ministers were believed to have been outraged by the requirement to implement the rule change in the UK.”

The consultation is open until 31 March 2017

Read more: Motor insurance: consideration of the 'Vnuk judgment' - Consultations - GOV.UK

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.