Churchill Insurance Company Ltd v Fitzgerald & Wilkinson & Ors

Where compulsory motor insurance must meet a judgment for an uninsured driver’s liability, the Road Traffic Act 1988, section 151(8), gives the insurer a right to recover from an insured person who caused or permitted the vehicle’s use. If that person is an injured passenger entitled to the judgment, automatic recovery of the whole sum would remove the benefit of compulsory insurance and is incompatible with the Motor Insurance Directives. The provision must therefore be read so that recovery in that situation is proportionate and determined by the circumstances of the individual case. The statutory right remains available where the insured person is not the passenger victim. A conforming interpretation may imply words, provided it remains consistent with the legislation’s underlying thrust and does not cross from interpretation into amendment.

These conjoined appeals concerned whether insurers could recover from insured passengers sums which they were required to pay under section 151(5) of the Road Traffic Act 1988 for injuries caused by uninsured drivers whom the passengers had permitted to drive.

In Wilkinson v Churchill Insurance Company Limited [2009] EWHC 1297 (QB), Blair J held that section 151(8) had to be interpreted compatibly with the Motor Insurance Directives. In Evans v Equity Claims Limited, His Honour Judge Gregory reached the contrary conclusion. Following an earlier reference by the Court of Appeal, including a preliminary ruling in Case C-442/10, the appeals returned to determine whether section 151(8) could be interpreted compatibly with European Union law and, if so, what wording should be implied.

1. Appeals allowed to the extent required by the corrected construction of section 151(8)(b). The court made no factual determination as to the proportion of any recovery in either case. The parties were directed to draft suitable orders.
2. Section 151(8) is a statutory right of indemnity available to an insurer which has paid a judgment under section 151(5). It operates against the uninsured person, or against an insured person who caused or permitted the use of the vehicle giving rise to the liability. It is linked to the statutory bargain reflected in section 148(6).
3. The provision has different effects in two situations. Where the insured person is not an injured passenger, recovery does not restrict the victim’s ability to obtain compensation through compulsory motor insurance. Where the insured person is the injured passenger, the combined effect of sections 151(5) and 151(8) would automatically remove that passenger from the benefit of the insurance. In the latter situation the provision concerns the extent of insurance cover and must comply with Articles 12(1) and 13(1) of Directive 2009/103/EC.
4. The European Union rules do not permit national rules framed in general and abstract terms to deny or disproportionately restrict passenger compensation solely because of the passenger’s contribution to the loss. A restriction may be imposed only in exceptional circumstances, after an assessment of the particular case, and must be proportionate.
5. The proper conforming interpretation is that section 151(8)(b) includes a qualification that, where the insured person may be entitled to the benefit of the judgment, recovery must be proportionate and determined by the circumstances of the case. This interpretation preserves the insurer’s right in cases where the insured person is not the passenger victim.
6. The interpretation does not contradict a fundamental feature of section 151(8). The section already requires proof that the insured person caused or permitted the use of the vehicle and that such use gave rise to the liability. The broad principle of consistent interpretation permits implied wording and departure from literal language, subject to the legislation’s underlying thrust and the boundary between interpretation and amendment.

• Court of Appeal (Civil Division): allowed both appeals to the extent required by its interpretation of section 151(8)(b); the factual application of proportionality was left for subsequent orders.
• Earlier Court of Appeal: referred questions concerning section 151(8) and the Motor Insurance Directives to the CJEU, reported at [2010] EWCA Civ 556.
• Queen’s Bench Division: Blair J in Wilkinson v Churchill Insurance Company Limited [2009] EWHC 1297 (QB) adopted a compatible interpretation.
• Walsall County Court: His Honour Judge Gregory held that the insurer could recover the sums paid under section 151(5); the decision was dated 3 June 2009 and no citation was stated.