Definitive Decision Issued in "Naughty Passenger" Cases

Cars braking in traffic

The Court of Appeal has now definitively ruled that an insured passenger is allowed to make a claim for personal injury on the policy even where he or she allowed a non-insured person to drive (Churchill Insurance Co. Ltd. V Wilkinson; Evans v Equity Claims Ltd, [2012] EWCA Civ 116, [2012] All ER (D) 157 (Aug)). This decision has resolved the anomaly which obliged the insurers to pay-out to an insured passenger with one hand under s 151(5) of the Road Traffic Act but then allowed the insurer to recover the same amount from the insured passenger under s151(8).

The practical effect of this was that the insurer would simply refuse to issue a cheque in this type of ‘naughty passenger’ case. This landmark decision followed a referral by the Court of Appeal to the ECJ. In summary, the Advocate General opined that s151(8) was incompatible with the Motor Insurance Directives in that it allowed insurers to withold compensation in each and every case irrespective of any fault on the part of the authorising passenger victim. However, practitioners should be aware that the Court re-interpereted s151(8) in a way which means that insurers can still make a recovery from an insured passenger who was not injured and can also make a ‘proportionate’ recovery from an injured insured passenger where the circumstances disclose that he or she contributed in some way to the loss.