Despite objections from racing advocates and from the insurance industry, the European Commission late last week announced a slate of auto insurance reform proposals that includes a measure that some warn would have dire consequences for motorsports in all of Europe.
Many of the five proposed reforms – ostensibly designed “to better protect victims of motor vehicle accidents and improve the rights of insurance policyholders” – are relatively straightforward and are designed to ensure that insurance rules are uniformly enforced throughout the European Union. However, one proposal intended to address the scope of EU insurance laws, has drawn plenty of criticism already for clarifying “that accidents caused during the normal use of a vehicle for the purpose of transportation, including its use on private properties, are covered.”
Specifically, as the European Commission elaborated in its FAQ page on the announcement, the scope proposal would bring EU insurance laws into agreement with three recent EU court rulings, including the 2014 Vnuk case, which found that the EU’s 2009 Motor Insurance Directive did not clearly distinguish between on-road and off-road use (partly as a result of inadequate translations) and therefore any motor vehicle, regardless of its use on public or private property, must be insured.
“The ‘use of a vehicle’ means any use of the vehicle, intended normally to serve as a means of transport, that is consistent with the normal function of that vehicle, irrespective of the vehicle’s characteristics and irrespective of the terrain on which the motor vehicle is used and of whether it is stationary or in motion,” European Commission officials wrote on the FAQ page.
In addition to criticism from a number of officials in the United Kingdom, the Vnuk ruling received condemnation from the Motorsport Industry Association and the Motorcycle Industry Association, both of which pointed out that obtaining third-party insurance for racing vehicles would be nigh impossible – motorsport insurance is generally unavailable in Europe – and thus requiring insurance for motorsports use would effectively “wipe out legal motor sport activity.” According to the MIA, the motorsports industry in the United Kingdom alone employs 50,000 people and generates £11 billion in economic activity.
Neither the MIA or the MCIA appear to have weighed in on last week’s proposals, but the Association of British Insurers has slammed the proposals as unworkable and difficult to enforce and specifically warned that motorsports would become an unintended casualty of the proposals.
Though the UK voted to leave the European Union in 2016, it remains subject to the EU’s laws until it officially separates from the EU. The UK Department for Transport conducted its own review of the Motor Insurance Directive and has yet to issue a ruling.
Though the proposals resulted from the European Commission’s 2017 review of the Motor Insurance Directive in which the commission wrote that “the scope of the Motor Insurance Directive should be limited to the use of vehicles in the context of traffic” (and despite a British court’s recommendation that the commission should restrict the Motor Insurance Directive’s scope to on-road vehicle usage) the proposals appear to wholly contradict that position.
While neither the text of the proposals or the commission’s FAQ page specifically address motorsports, the clarification appears to leave no wiggle room for purpose-built race cars and very little leeway for street-registered competition vehicles (which should have insurance anyway). One of the other court cases cited in the proposal to increase the scope of EU insurance laws – Andrade – initially appeared to open the door to an argument that use of a vehicle in motorsports does not constitute transportation; however, judges in the third cited court case – Torreiro – refused to rule specifically on an exemption for motorsports.
Legal observers note that the formal process for enshrining the proposals into the EU Motor Insurance Directive could take as long as a year and a half.