Wilkinson v Churchill - a window of opportunity for insurers?

Last week the Court of Appeal gave its much anticipated judgment in Wilkinson v Churchill about s151(8) of the Road Traffic Act 1988. In our briefing, we offer guidance to insurers about the effect of the decision and specifically endorse the tactical benefits of a timely evaluation of the blameworthiness of an injured insured in "causing or permitting" the use of their vehicle by an uninsured driver and consequent early consideration of settlement of appropriate cases.

The much anticipated judgment about the right of insurers under s151(8) of the Road Traffic Act 1988 in Wilkinson & Fitzgerald v Churchill and Evans v Cockayne & Equity was handed down on 24 August 2012 by the Court of Appeal.

The two appeals were concerned with operation of s151(8) of the Road Traffic Act 1988 and how it was to be interpreted in accordance with European Directives. The issue in question was whether or not an insurer is entitled to recover sums it was obliged to pay to an insured injured passenger pursuant to a judgment against the negligent uninsured driver. The right arises where an insured “caused or permitted the use of the vehicle that gave rise to the liability”.

It was held that the right created under s151(8) was unaffected where an insured caused or permitted an uninsured driver to use the vehicle, but suffered no injury himself: the insurer pays out to the injured passenger. Regarding the insured injured passenger, the Court of Appeal said that, following the decision of the Court of Justice of the European Union, s151(8) could not be interpreted to provide a blanket defence in respect of an injured insured. The issue of blameworthiness should be determined according to proportionality and the circumstances of each case.

So what does this judgment actually mean for insurers?

We are now in unknown territory to some extent. The Court of Appeal did not give any guidelines for determining “proportionality” or give any indication of the type of factors that may be relevant when considering the extent of recovery in an individual case. The court, however, was clear in communicating that the means of qualifying the right of recovery under s151(8) was different from any issues of contributory negligence. The conduct of causing or permitting the use of the vehicle is quite separate to conduct which contributes to the accident or injuries sustained.

There are likely to be a number of cases that have been stayed pending the outcome of these appeals and, procedurally, the wheels will start turning again. Tactically, it is a good time now to review these cases to determine the relative culpability of the insured. For example, did he/she turn a “blind eye” to the use of the vehicle by the uninsured driver or did he/she actively encourage the use of the vehicle?

Providing insurers can legitimately justify any recovery made on the basis of proportionality and subject to the circumstances of each case, there is arguably now a window of opportunity to resolve these cases before tariffs are set down by the courts. The cases of Wilkinson v Churchill and Evans v Equity will now be remitted back to their originating courts and it is not unreasonable to foresee further litigation arising out of these cases as claimants seek further guidance from the court.

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