Joined: 27 July 2010
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Posted: 30 July 2010 at 11:20am
Hm, I'm going to have to ask the Powers That Be about this one, as I've known two different outcomes.
First, the insurer meets the claim from the third party- and then goes after the not-insured-any-more to recover their costs.
Second, the insurer doesn't meet the third party claim, and the third party ('s lawyer/insurer/ambulance chaser, delete as appropriate) goes after the not-insured-any-more party directly to recover costs.
If I get clarity from above on whether that's insurer-specific, claim-specific, if there are guidelines, or if it's down to what the third party's legal rep chooses to try, I shall post what I can share.
Joined: 27 July 2010
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Posted: 30 July 2010 at 11:51am
Well, I was directed to RTA 1998, sec 151(5) and 152(2), which OPSI says:
"Notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy or security, he must, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment—
(a)as regards liability in respect of death or bodily injury, any sum payable under the judgment in respect of the liability, together with any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum, "
and
"Subject to subsection (3) below, no sum is payable by an insurer under section 151 of this Act if, in an action commenced before, or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration—
(a)that, apart from any provision contained in the policy or security, he is entitled to avoid it on the ground that it was obtained—
(i)by the non-disclosure of a material fact, or
(ii)by a representation of fact which was false in some material particular, or
(b)if he has avoided the policy or security on that ground, that he was entitled so to do apart from any provision contained in it."
Clear as mud, I know- my (not legally trained) interpretation is insurers are liable should it go to court, unless there's a declaration voiding the policy.
waiting for the Legal to English translation, updates as I get them.
Edited by bunrotha - 30 July 2010 at 12:50pm
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Providing bad days to the deserving using "balance of probability" rather than "beyond reasonable doubt."
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Posted: 30 July 2010 at 12:48pm
Cor, monopolising the thread now, sorry. I have had an audience with the guru of such matters, who has been a claims director with a Lloyds syndicate. He's explained this one to me like this:
An insurer can void a policy, the test of their liability being whether the reason for voiding occurred before or after the inception. Fronting would be before the inception, in this topic's case.
For after-inception events, the insurer can refuse indemnity to the policyholder, but remains liable for the third-party claim under RTA.
For before-inception events, the insurer's liability arises not from RTA, but from Article 75 of the MIB Articles of Association.
Regarding recovery and the options I posted above, the insurer has the right of recovery from the policyholder after voiding or avoiding the policy. Direct recovery attempts from the policyholder by the third party takes place anyway, it seems it often comes down to whether the legal folks and policyholder try to involve the insurer, knowing that even if they pay out, they will come back for the money from the policyholder anyway, but with an extra layer of lawyers involved now.
The declaratory proceedings that allow avoidance of liability (RTA sec 152) are apparently quite rare, and turn up in cases such as a named driver crashing the car and injuring the policyholder, so the policyholder becomes a third party in a claim against their own policy- if the policyholder was negligent in maintaining the car, leading to the crash, the insurer will go to court to void the policy, to stop the policyholder benefiting from their own negligence.
The upshot of all this seems to be that most insurers, most of the time, will meet third party claims that actually arise, with the intent of MIB remaining the insurer of last resort. Getting them to admit that on the phone from the roadside is of course another matter.
Cheers,
Bunrotha.
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Providing bad days to the deserving using "balance of probability" rather than "beyond reasonable doubt."
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Posted: 30 July 2010 at 6:18pm
Bunrotha,
Thank for that very informative answer.
To summarise the pizza delivery driver example then, if the driver was already using his vehicle for this purpose at the time he applied for insurance and didn't disclose this use in his application, then in the event of him pranging someone elses car the insurance company could legitimately void the policy and not pay any third party claim.
However, if the person had already obtained insurance but only for S,D & P use, and then at some point started using the vehicle to deliver pizzas, then in the event of him pranging someone elses car the insurance company could legitimately void the policy but would have to pay any third party claim.
So in the first instances there would be a contravention of Section 143(1) but in the second instance there would be no contravention of Section 143(1) ?
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Posted: 30 July 2010 at 8:41pm
BlueScorpio3, spot on, that's my understanding too.
looking at s143(1), I see some words to support this:
a person must not use a motor vehicle on a road unless there is in force in relation to the use of the vehicle by that person such a policy of insurance...
If the insurer takes the position that "Had we known that, we'd never have taken you on cover," they void from inception, which means the policy is not in force, and thanks to contractual wording, never was, causing an offence under s143 without affecting liability to third parties under s151. Of course, I'm open to correction on that too!
The article 75 stuff acts to cover claims by third parties against uninsured drivers, which I can understand, since in theory the third party didn't do anything wrong. It doesn't provide s143(1) insurance, so I agree a contravention is likely for policies voided from inception.
I do see a pizza-shaped loophole though- s143(3), where using a car for work, that isn't their own car, and playing dumb on insurance, assuming there is cover, may work as a defence. I'd like to believe that unscrupulous pizza house owners never do that in the real world, but I suspect I'm being hopelessly naive there.
If there is an accident, the determination of liability for RTC injury claims under £10,000 has to be done in 14 days (I never thought I'd say it, but thank you MoJ) so you may find a very good indicator of an s143(1) offence pops up quite quickly. The ACPO-ABI MoU and DPA Section 29 disclosures are your friend!
Goes without saying, best of luck getting enough truth to sort it all out at the roadside. I don't envy you there.
Edited by bunrotha - 30 July 2010 at 8:43pm
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Providing bad days to the deserving using "balance of probability" rather than "beyond reasonable doubt."
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