HC Deb 10 April 1987 vol 114 cc580-9 10.15 am
Mr. Cranley Onslow (Woking)

I am glad to have the opportunity to raise with my hon. Friend the Parliamentary Under-Secretary of State for Transport a matter which is fairly simple on the surface, and which I hope will be susceptible of a simple solution.

No doubt, Mr. Speaker, you are fully familiar with the highway code. You will, therefore, know that if you read it carefully you will find a reference to the need for motor insurance—although it is the only reference that I have been able to detect. It appears on page 66, in fairly small print, and forms part of the advice to drivers of motor vehicles that, before driving, they should ensure that your use of the vehicle is properly insured and that there are no restrictions in the relevant insurance policy…which would make your use of the vehicle illegal". I want to ask my hon. Friend whether "properly insured" in this context really means what it says. His defence will rightly be that "properly" in such a context means that the legal requirements are satisfied. Most of us know that, provided that a driver has a third party policy, generally speaking he can drive legally on the open road. He will not be covered as fully as he might be if he had a comprehensive policy, but those policies are rather more expensive to take out, because they provide much wider cover. The difference between third party and comprehensive policies is well known, and motorists of all ages are probably well equipped to make the appropriate choice according to their needs and means. However, I doubt whether many motorists realise that comprehensive insurance is not quite what it says.

Many of us are now aware of a scheme run by the Motor Insurers Bureau whereby, in the event of an accident causing injury which results from the action of a driver who is negligent but who is not insured, an additional element of cover is provided over and above what the motorist may have taken out for himself. However, the position on which I want to focus my remarks is that in which the driver is insured but is not negligent. That was brought to my attention recently by a constituency case; I followed it up, and it has led on to others.

Let me briefly give some details of that first case. On 4 March last year, a constituent of mine, Miss Samantha Tremayne, had her R registration Cavalier written off in an accident. She was not in the car at the time; it was parked outside her home in Station road, West Byfleet, when another driver—also a constituent of mine—drove her car into it after suffering a sudden stroke. She was taken to hospital, where she had another more serious stroke, and later, most unfortunately, died.

The driver's insurance company refused to accept liability for the accident, on the ground that no negligence had been involved and that there had been no reason to suspect that the unfortunate lady might suffer a stroke. The case went slightly further: the driver's executors were advised that to meet a claim for Miss Tremayne against the estate might prejudice their own claim against the insurance company. My constituent, who was covered only by third party insurance, was thus left facing a loss of about £600. Her solicitors were quite unable to persuade the other insurance company to meet the loss. Miss Tremayne summarised it to me in a letter in which she said: I have been told by a solicitor that I have no legal claim to the Insurance Company, because in their eyes, it is classed as an 'act of God."' I heard about the case in October 1986 and contacted Lloyd's about it, but without any success. I was told that if Miss Tremayne had taken out comprehensive cover, she could have had her claim met, probably by her own insurance company under an indemnity. A letter to me from Mr. Presland, a Lloyd's consumer inquiries officer, contains this sentence: Regrettably Miss Tremayne chose to take only restricted insurance cover in her own right and to rely upon her common law rights of recovery for recompense in respect of damage sustained to her vehicle as a result of the negligence of another. Had she taken out Comprehensive cover, she could of course have sought recompense from the insurer on an indemnity basis. The consumer inquiries officer said that the case did not involve Lloyd's, and that Lloyd's did not think that the insurance company had acted unreasonably or unfairly in refusing to meet the claim.

The point about having a comprehensive policy is relevant. It is also relevant that such a policy would have cost this young lady, a 19-year-old office worker, about £300 a year. She felt, understandably, that that was more than she could possibly afford. In the end, she was lucky. The executors of the other driver agreed to make an ex-gratia payment from the deceased's estate, but Miss Tremayne still felt that her experience revealed a very unsatisfactory state of affairs. I was glad to take it up on her behalf with Ministers.

In their replies to my letters, both the Lord Chancellor and my hon. Friend the Minister expressed their sympathy, but they said that there was nothing that they felt could or should be done. In particular, they both resisted any suggestion that the law of liability should be amended to provide a no-fault scheme for compensation in cases of personal injury or property damage.

I should be out of order, Mr. Deputy Speaker, if I sought to pursue the need for legislation for such a scheme. I realise that there are good reasons why it may not be so desirable as it appears to be on the surface, but it is right that I should try to press the matter further, if only to alert more people to the kind of risks that they may run.

My constituent also says : How can it be fair to a person, for their car to be parked outside their own house and written off, to then find there is no legal claim—surely this cannot be right. Miss Tremayne is not alone in feeling that way. Having taken certain steps to interest the local press in the case, I received a letter from a gentleman who lives not far away in Weybridge, who told me of an incident that he described as follows : My son's car was damaged while parked, when an unfortunate man died at the wheel of his car, crashing through my front fence and coming to rest in my garden. Due to the bad publicity in a Sunday newspaper the Insurance Co. eventually paid up, although previous to this a solicitor could not help. That is another way of dealing with the problem. I was glad to learn that that case had ended so well, although I was interested to hear that it had happened in 1973. As my hon. Friend the Minister must therefore be aware, this is a long-standing problem.

Closer to home—indeed, only last week after I had asked for the opportunity to raise this matter on the Adjournment— I was extremely interested to receive a letter from an engineering company in my constituency telling me of a very similar case that it had recently experienced. The managing director of the company has been kind enough to send me copies of two letters on the subject. The first is a letter from the insurance company to the solicitors. It says: we have now received our Engineer's report following the inspection of your vehicle and note that it has unfortunately been rendered beyond economic repair. Our Engineer has placed a pre-accident value of £325 and £335, with a salvage that should realise between £25 and £30. However, the accident circumstances were that our Insured suffered a blackout and thus collided into the rear of your vehicle. We have since been advised that our Insured driver…has undergone a series of tests and was found to be suffering from a brain tumour, and is undergoing surgery. The circumstances are such that our Insured was unaware of his illness prior to the accident, and therefore you will appreciate that we are unable to accept responsibility, in view of the fact that our Insured has not acted negligently. That letter prompted a fairly pointed response from the engineering company, which the managing director has copied to me. It says : we have taken the trouble to take legal advice ourselves, and the advice that we have received confirms the insurers' position…However, we were under the mistaken impression that we were paying a large amount of money to Blue Chip Insurers for comprehensive cover under any circumstances. A glance at our records will show that this particular policy has been very profitable to the insurance company and they could well afford to meet this claim in full and still show a handsome profit over the years. The third party is a seventeen year old toolmaker apprentice who is being forced to take a taxi to work because there is no other form of public transport available and he does not have the money to repair his vehicle. That is quite as bad a case as the one that I originally quoted. In some respects it is rather worse. The case has not been resolved, although I very much hope that it will be resolved, either as a result of my reference to it today or as a result of correspondence that has already been embarked on between those concerned.

I suspect that there are a great many such cases but that they may not all have come to light. Perhaps this debate will have the effect of bringing more of them to light. If it does, I welcome it.

I have further evidence to put to my hon. Friend the Minister. By chance, I have heard of another case. A man and his wife were driving along the motorway in April 1986 when the car that was overtaking them suffered a burst tyre, collided with their car and turned it completely over. They ended up on the hard shoulder, mercifully uninjured, although they were severely shaken. Their car was virtually a write-off. They had only third party fire and theft cover. The insurers of the other party said that their driver had not been negligent and that they were under no obligation to meet the costs of the accident and the writing off of the car.

None of the cases that I have quoted involved injury. My hon. Friend may tell me that had injury resulted from any of these incidents, the position might have been different. Of course, it might have been different for a variety of reasons. The accident victimes might have had cover against personal injury. The Motor Insurers Bureau, or Lloyd's, might have taken a different view. The case might have been pursued in court on the grounds that, although negligence was denied there must have been negligence.

When discussing this matter with friends in the legal profession, I heard of a case some years ago in which a milkman on his early morning round drove in the dark into a tree that had been blown across the road. He was quite severely injured. After a great deal of diligence on the part of the legal experts, his counsel was able to establish in court that the owner of the tree was negligent, in that he had not inspected the tree in question regularly enough to be sure that it would not fall across the road.

In cases of that kind there is a great deal at stake. Personal injury accidents can result, rightly, in substantial damages. In many cases the threat of legal action is probably sufficient to result in a settlement out of court. However, in cases where the sums involved are relatively . small — for example, under £1,000—very few people would be advised to incur the expense of going to law. In most cases, if not in all, it has to he written off as sheer bad luck. The unfortunate victim is left wiser but sadder and knows, as a result of his own bitter experience, what he ought to have been aware of and what he should have been told at a much earlier stage.

As I have said, I am not arguing the case for a no-fault compensation scheme. However, I know that there is some consultation at Government level about the adequacy of our existing insurance arrangements. In fact, I have been fortunate enough to obtain a copy of a Department of Transport press notice, No. 451 of 10 October 1984. I am sure that my hon. Friend will be instantly familiar with it because it releases comments made by him about the extension of compulsory motor insurance to liability for property damage. I remind my hon. Friend that on that occasion he said : My Department is canvassing opinion on changes to extend our compulsory insurance laws to include liability for property damage, in response to an EC Directive which aims to achieve a measure of harmonisation of motor insurance laws throughout the Community. The Directive must be implemented by the end of 1988, but I want to secure improvements to our domestic motor insurance arrangements well before then. I look forward to the proposed extension of compulsory insurance and of the Uninsured Drivers Agreement with the Motor Insurers' Bureau. I want to ensure that accident victims can generally expect to be compensated for damage to their property—including, of course, their vehicles—caused by negligent drivers, even where the driver responsible is uninsured. I return to a point that I made earlier. I want to ensure that accident victims can generally expect to be compensated for damage to their property and vehicles caused by drivers who are not negligent but whose insurance companies say that they are not prepared to accept liability for the accident, retreating behind the act of God defence.

My first request is that my hon. Friend should enter into further discussions on that in the near future with the insurance industry. However, until those discussions bear fruit, as I hope they might, I should like to ask him one other thing. Will he take some action to ensure that drivers are warned of the risks that they may quite inadvertently run, especially young drivers, who the insurance companies think are the worst risks and who are thus faced with the highest premiums? They should be able to make an informed judgment about whether it is worth taking out comprehensive rather than third party cover. The insurance companies that provide cover, especially for young motorists, might turn their attention to doing something to fill that gap.

This problem should be known to people. I may not be right, but it seems that the highway code is the right place in which to put such a warning. I realise that a new edition of the highway code has just been published and that it would be expensive to demand that it be reprinted. However, on another occasion, I might have a go at the Minister about the curious omission from the highway code of any advice and guidance about driving in the dark. That has surprised me now that I have studied the code as carefully as I have as, I am sure, Mr. Deputy Speaker, you always do. However, if the highway code is not the right place for a warning, may I ask that a warning should still be given and that the drivers should be allowed to make the choice in an informed state of mind, rather than in total ignorance.

If, at the end of the day, public pressure builds up to a point where the insurance company are obliged, or think it right, to revise the forms of cover that they offer, that would not be a bad thing. However, it is a bad thing that in such cases anyone can take refuge in legal technicalities, when the right answer is a change of attitude.

10.34 am
The Parliamentary Under-Secretary of State for Transport (Mr. Michael Spicer)

My hon. Friend the Member for Woking (Mr. Onslow) has given the House a valuable opportunity to consider a subject which. as he has said, causes a good deal of understandable concern to the unfortunate few who find themselves in similar circumstances to his constituent, and to the other cases that he mentioned. Mercifully, I am informed that there are few such cases. However, my hon. Friend mentioned and has written to us about, several of them. We would welcome details of the third case that he mentioned, relating to the engineering firm because, from what he said, that case seemed to involve comprehensive insurance and damage to the insurer's own vehicle, which damage should, perhaps, have been covered. Perhaps my hon. Friend could give us further details about that.

Mr. Onslow

I shall be glad to do that. Part of the problem is that the victim of the accident was riding a small motor cycle and was run into from behind by a large truck. The truck did not suffer any damage. However, even if the truck had been damaged, I am not sure that my hon. Friend would be right in thinking that that carried a contingent liability to pay for the damage to the motor cycle.

My hon. Friend said that there are few such accidents. If he has evidence to that effect, I hope that he will let the House have it now. However, if he does not have any real evidence about how many such accidents occur, I hope that he will undertake to ensure that some steps are taken to establish the facts. I suspect that if, in a short time in my constituency, I can find two cases within 12 months, there must be about 1,000 cases at any one time in the country.

Mr. Spicer

As my hon. Friend has already said, one of the benefits of this debate is that it may well raise the level of public knowledge about such matters. At the moment, all I can say is that we are informed that motor accidents in which nobody has been negligent are rare. However, as he has implied, there is no reliable record of their number. We have to go on the fact that the Association of British Insurers, which draws on the experience of most motor insurers in the United Kingdom, has confirmed that cases in which there is no negligence are rarely brought to its attention. I repeat that it may well be that, as a result of this valuable airing of the subject that my hon. Friend has initiated, we may receive better information on the subject.

It goes without saying that, like my hon. Friend, I have great sympathy for people who find themselves in the unenviable position of having suffered injury, or had their property damaged in an accident, and have nowhere to turn to for compensation. My hon. Friend is right to draw attention to an aspect of the law of liability, which is not widely known. Some people may, as a result of the debate, be in a position to take out their own insurance to protect themselves against the monetary consequences of such an accident.

The principle from which the problem arises goes beyond motor insurance, which is my Department's responsibility. The law of civil liability relates to accidents of all sorts, and is primarily a matter for the Lord Chancellor. It may help if I take a few moments to outline the legal position.

It is a fundamental principle of British law that payment of compensation following an accident depends on proof of negligence by the person claimed to be responsible. There is no automatic right to compensation simply on the grounds that the victim of the circumstance was himself or herself free from any blame. Whether the allegedly responsible person has third party insurance does not affect this over-riding principle. Either he is responsible for the accident or he is not. If he is, he is liable to compensate the person who has suffered loss. He may do so from his own pocket, or call upon his insurance, where he has it.

That is not confined to accidents involving motor vehicles. Where injury or damage is caused in other ways, say a tile falling from a roof, the same principle applies. To sum up, whatever the insurance position, the victim has no legal right to compensation until negligence has been established. When we extend compulsory insurance to property the principle about negligence will be unaffected. Indeed, it is unaffected by the present compulsory legislation with respect to injury.

That brings me to the specific area of difficulty that my hon. Friend has identified. His constituent was involved in an accident in which her parked car was written off when another car ran into it. Fortunately, she was not injured. So far as I am aware, there was no suggestion that my hon. Friend's constituent was in any way at fault.

Mr. Onslow

indicated assent.

Mr. Spicer

My hon. Friend confirms that. But there was equally no suggestion of negligence by the other driver involved : she suffered an unpredictable stroke at the wheel. The accident was classed as what is sometimes known as an "act of God", and so my hon. Friend's constituent received no compensation for the loss of her car from the other driver's insurer.

I readily sympathise with the apparent injustice which my hon. Friend's constituent sees in her situation, and I can understand the feeling that insurance companies should be required to pay in such cases regardless of any proof of negligence. After all, as my hon. Friend said, they look big enough to bear such a burden without really noticing it. But this supposes a direct relationship between the victim of the circumstance and someone else's insurer. Such a connection does not exist unless it is established through the someone else being at fault for the accident.

An insurer and his policyholder are parties to a private contract under which the insurer, in return for the premium, undertakes to meet the policyholder's liabilities under civil law. In the sort of case my hon. Friend has described, no such liability arises, the contract places no obligations on the insurer, and there is no basis for a connection between the insurer and the person who has suffered damage.

I recognise that my hon. Friend's purpose in raising this subject today is not to suggest that insurers behave improperly under the law as it stands, or in relation to their contractual position. Rather he is suggesting that either the law should be changed — that was implicit in his opening remarks—or, at least, that road users should be warned of some of the pitfalls which exist for accident victims. I shall return to that point.

So far as changes in the law are concerned, I can understand from the blameless victim's point of view the attraction of a system that would avoid the sometimes uncertain process of proving negligence. But this would be a major departure from a long established principle, which could not be considered in isolation from the repercussions for other types of accidents. My hon. Friend specifically said that he was not arguing for a no-fault scheme, but it is worth dwelling for a moment on the proposals which have existed for such a scheme.

The House will recall that this question of paying compensation without establishing negligence was among those covered in 1978 by the royal commission on civil liability and compensation for personal injury under the chairmanship of Lord Pearson. The royal commission had in mind a central compensation fund, financed from a levy on the price of fuel. Accident victims could be compensated from this fund according to the extent of their injuries without taking negligence into account. The need to prove negligence following a road accident would be removed, at least for the initial entitlement to compensation.

The royal commission's proposals were not designed to cater specifically for the sort of case that has led to this debate today. They dealt with injury, not damage to property. But they are highly relevant to my hon. Friend's concerns in that they reflected the commission's more general criticisms of the law which requires proof of negligence as a basis for the payment of compensation.

Even if such compensation arrangements were restricted to road accidents they would have involved considerable costs. The Department of Health and Social Security estimated that about 1,000 staff, including 200 doctors, would be needed for the full implementation of such a no-fault scheme — and that is only for motor accidents.

Groups representing the disabled made the point forcefully that the proposed scheme would effectively discriminate between those killed and injured on the roads and other accident victims. Extending the scope of the system further to accommodate cases of property damage would exacerbate those particular problems, and the discrimination which disabled groups have seen would be implicit.

Mr. Onslow

A reason why I said specifically that I was not arguing for a no-fault compensation scheme was that when my hon. Friend wrote to me he set out the line of argument that he has just deployed in the House. It may help him to know of a further and even more powerful persuader in the form of the Lord Chancellor, to whom I wrote on the same subject. He said that if a no-fault compensation scheme were introduced here it would certainly lead to vastly increased premiums, and questions like contributory negligence and causation would inevitably arise. That would open the way for additional man hours in the legal system, so clearly we need a better, simpler solution which does not involve a great deal of litigation.

Mr. Spicer

It is always useful to hear the Lord Chancellor's wisdom. The way he spares the use of legal time, in this instance as in others, is commendable. Nevertheless, as my hon. Friend raised the subject I felt that it was worth reminding ourselves about the possibility of such a scheme and of its disadvantages.

My hon. Friend suggested that road users should at least be warned of the difficulties that they could face in an accident which is nobody's fault. In particular, he suggested that the highway code could integrate such a warning, and in many respects that suggestion is attractive. As he said, the highway code is widely available and is directed not only at drivers, but a complete range of road users. The section entiled "The law's demands" already gives advice on insurance cover required by law, but, as my hon. Friend rightly said, the highway code focuses on the legal requirement for insurance.

However, my hon. Friend has said that the advice should go rather further than simply pointing out the legal requirement, and that is where we get into some difficulties on this method of advertising the problem. The highway code reminds motorists of the general need for insurance as well as for licensing, testing, taxation and so on. Insurance is part of the range of legal requirements that it puts into the small print. However, it is not designed to give detailed advice on these matters. It is a code of behaviour, rather than a do-it-yourself legal guide.

My hon. Friend will know that a revised version of the highway code has just been published. The amendments are almost all about improving safety, and my hon. Friend has given some advice to the House, which I will pass on to my hon. Friend the Minister who is responsible for roads. The code covers a number of new aspects of driving such as drinking and driving, car telephones, child restraints and so on. However, motorists need much more specific advice on insurance than that which a code of behaviour can give. They must have advice that takes into account individual circumstances and requirements. The insurance companies are willing to give such advice and it is part of their business to do so.

This debate will have helped to reinforce the need for motorists to think carefully about precise insurance needs and to ask themselves whether there are gaps in those needs. One of them may be the problem, raised by my hon. Friend today of whether there is any negligence involved. Even bearing in mind that the majority of the country reads Hansard the day after our debates, my hon. Friend will accept that not all motorists will, tomorrow morning, have the benefit of studying his advice. Therefore, there is a case for the Government giving wider publicity to the problem.

Today I have asked the driver and vehicle licensing centre at Swansea to consider including with the vehicle licensing reminders advice on the considerations that drivers need to take into account when buying insurance. By this means, we can provide a great majority of drivers with basic advice on which to base their decisions on whether to purchase insurance to protect their own interests should they be involved in the kind of accident about which we have heard today, and the circumstances that might apply.

Mr. Onslow

That last point is a welcome development, but I wonder whether my hon. Friend could not do slightly more than send a reminder out with the motor vehicle licence renewal form. By the time one comes to renew a vehicle licence, one will have been driving for 12 months and if one is driving a car that one does not own, one will never see the form.

Having hastily fished my driving licence out of my pocket and seen that it still has a few years to run, I will not recommend that the advice that my hon. Friend so wisely decided to make available should be sent with driving licence renewal forms. However, we could append such advice to the driver licence application forms in the first place. As soon as a driver applies for his first licence, he will be made aware of insurance. That is the moment when he first goes on the road and when he is first at risk, and it would seem sensible to give him all the information then and not a year later, when he comes for renewal of his provisional licence or upgrades it for a full licence. Perhaps my hon. Friend will have a word with the DVLC about that possibility.

I suspect that one of the reasons why the instance of this type of problem is thought to be rare is that people do not press the point with the insurance companies, and the police never get to know about the accident figures because non-injury accidents do not figure in police statistics. A sampling exercise would be justifed, and I hope that my hon. Friend will feel able to pursue that matter as well.

Mr. Spicer

Those are useful suggestions, and I will consider the sampling exercise point. I am not sure how one would set about that, given, as I understand it, the small base from which one would be working. One would have to carry out a large exercise to pick up any focus on the small amount of data that would he forthcoming.

I shall consider my hon. Friend's suggestion about including this advice on the licence application form. There are two considerations that have come to me about that, off the top of my head. The first is that with the age-to-70 licence, a vast number of people would already have got through the net of my hon. Friend's suggestion and will continue to remain outside it because they will not be applying for a licence renewal until they are 70. To meet my hon. Friend's point, we must do something with greater urgency than that suggestion would imply.

Secondly, there is the problem, which has been a running theme throughout the debate, of knowing where to stop with the detail of advice. One could end up by suggesting particular insurance companies that are better than others, and that is clearly not the role that the Government would wish to undertake. On the application form point, the question is how much further one could go than the highway code in saying tht one must he insured. I will consider that point because at the moment we are working out a form of words with Swansea that would be appropriate to carry out what my hon. Friend has been suggesting in warning people about this problem. When we have the form of words, it might be used for other purposes.

I thank my hon. Friend for giving the House an opportunity to discuss this important subject. Although I have not been able to meet one of his precise suggestions —that we should devote space to matters of insurance and liability in the highway code — I have been encouraged by my hon. Friend to give the matter more publicity. My intention is that the message that we shall put out will emphasise the importance of drivers' decisions on insurance and their implications. As my hon. Friend has said, it is manifestly in the interest of motorists to be sure that they understand the cover that they are buying or have bought. The debate has served a valuable purpose in pointing out that fact.