Daniel James Colley v Motor Insurers' Bureau

The compulsory motor insurance obligation under Article 3 of the Directive 2009/103/EC is determined by EU law. It is not satisfied merely because a policy existed when the accident occurred. Where national law permits an insurer to avoid the policy retrospectively for material misrepresentation, contrary to EU law, the required cover has not been provided. The Article 10 compensation body's obligation is coextensive with the Article 3 obligation and requires it to make good the resulting shortfall. The limited exclusions permitted by the Directive must be strictly construed. Although the Directive has no horizontal effect against a private insurer, the compensation body remains directly liable where it is an emanation of the state.

Mr Colley suffered catastrophic injuries as a passenger in a vehicle negligently driven by Mr Shuker. A policy existed over the vehicle, but the insurer later avoided it ab initio for material misrepresentation under section 152(2) of the Road Traffic Act 1988. The insurer was therefore released under national law from its usual liability under section 151, although the Secretary of State accepted that the statutory scheme was incompatible with the Directive 2009/103/EC.

The claim against the private insurer had been struck out, and the domestic compensation agreement did not assist Mr Colley because he knew that Mr Shuker was uninsured. Freedman J held that the Motor Insurers' Bureau was liable under Articles 3, 10 and 12. The Bureau appealed on whether a policy existing at the accident date satisfied the Article 3 obligation despite subsequent avoidance.

Appeal dismissed. Stuart-Smith LJ gave the judgment, with which Warby and Holroyde LJJ agreed.

1. The court distinguished the scope of the Article 3 insurance obligation, which is a matter of EU law, from the meaning, validity and effect of an insurance policy, which are matters of national law. The relevant questions are the scope of the EU obligation, the effect of the policy under national law, whether there is a factual shortfall, and whether the compensation body must remedy it.
2. A policy in existence at the time of an accident does not satisfy Article 3 if national law permits the insurer to avoid it ab initio for material misrepresentation. The reasoning in Ruiz Bernaldez ([1966] 2 CMLR 889) and Fidelidade-Companhia de Seguros SA v Caisse Suisse ([2017] RTR 26) established that such avoidance is incompatible with the required protection of third-party victims. Csonka v Magyar Allam ([2014] CMLR 377) concerned only insurer insolvency and did not govern retrospective avoidance.
3. Under Article 10(1), the compensation body's obligation is coextensive with the Article 3 obligation. It must make good the difference between the cover required by EU law and the cover actually available under national law. There is no gap into which the injured victim may fall. Juliana ([2018] 1 WLR 5798) and Lewis v Tindale ([2019] EWCA Civ 909) supported that conclusion.
4. The exclusions permitted by the Directive are exhaustive and must be strictly construed. The Article 10(2) passenger exclusion was not available on these facts, and the Bureau abandoned its appeal on that issue. The court agreed with the relevant reasoning in Delaney v Secretary of State for Transport ([2015] EWCA Civ 172).
5. The pre-amendment section 152(2) scheme created the shortfall. The Bureau, as the state's compensation body and an emanation of the state, was directly liable to compensate Mr Colley up to the limits of the Article 3 obligation.

1. Court of Appeal (Civil Division): The court dismissed the Motor Insurers' Bureau's appeal and upheld the decision that the Bureau was liable under the Directive.
2. High Court of Justice, Queen's Bench Division: Freedman J held that the Bureau's obligation covered a policy existing at the accident date but subsequently avoided ab initio, and gave judgment for Mr Colley: [2020] EWHC 3433 (QB); [2021] 1 WLR 1889.