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European court rules that inoperative and unused cars need insurance too

Published in blog.hemmings.com

BMW in Greece. Photo by Charlie.

Just as a farming accident inadvertently imperiled the future of motorsports in Europe, an ill-fated joyride has now made it more difficult for museums, collectors, and restorers to keep cars around after the European Court of Justice ruled last month that even immobilized and unused vehicles need insurance.

The case in question dates back to 2006, when a Portugese grandmother, Alina Antónia Destapado Pão Mole Juliana, took her car off the road and parked it in her yard due to her declining health. Though it was still roadworthy and she’d yet to formally de-register it, she let the compulsory insurance on it lapse. That November, her son took the keys to the car – both the son and the car were unidentified in court documents – and ended up driving it off the road after losing control of it, killing himself and two of his passengers.

Portugal’s state insurance fund, Fundo de Garantia Automóvel, paid out compensation to the survivors of the two passengers and then in turn sued Juliana and her granddaughter, Cristiana Micaela Caetano Juliana, for reimbursement. Juliana objected, arguing that because she had literally removed the vehicle from the road, kept it on her private property, and did not intend for it to be used, she had no obligation to maintain insurance on it.

The Fund argued that because all vehicles pose “inherent risks,” owners of those vehicles need to insure the vehicles – even when the vehicles are not in use and kept on private property – until those vehicles are formally de-registered and withdrawn from use.

Portugal’s Supreme Court decided to relay the case to the European Court of Justice. In its deliberations, The European Court of Justice considered the expanded scope of the European Union’s 2009 Motor Insurance Directive set forth in the court’s own 2014 decision in the Vnuk case, a ruling that determined that the use of motor vehicles – and thus the obligation to maintain insurance on motor vehicles – extends beyond public roads and onto private property.

That ruling, which has drawn condemnation by the Motorsport Industry Association and the Motorcycle Industry Association for its disregard of the implications regarding European motorsport – an activity that will now require insurance coverage but which is practically uninsurable.

Ultimately, in a decision handed down in early September, the European Court of Justice sided against Juliana.

It must be held that a vehicle which is registered and therefore has not been officially withdrawn from use, and which is capable of being driven, corresponds to the concept of ‘vehicle’ within the meaning of Article 1(1) of the First Directive and, consequently, does not cease to be subject to the insurance obligation laid down in Article 3(1) of that directive, on the sole ground that its owner no longer intends to drive it and immobilises it on private land.

While the Juliana decision reiterates the same basic threats to motorsport conducted on private land in Europe that the Vnuk ruling posed, it also conceivably extends the requirement for insurance coverage to European car museums – many of which undoubtedly keep their vehicles registered and in working condition but do not insure them for use on the road – as well as restoration shops and private collectors whose in-process projects and parts cars behind their shed cycle in and out of operative condition on a regular basis. Sans insurance, those vehicles will need to be deregistered and completely removed from operation.

Compounding both the Vnuk and the Juliana decisions is yet another court ruling, this one from the U.K.’s Court of Appeal (UK Insurance v. Holden), which holds that repairing a vehicle constitutes normal use of a vehicle (again arguing that a vehicle is inherently dangerous whether or not it is being driven), and thus any vehicle under repair – or, theoretically, under restoration – is obligated to carry insurance as well.

The European Commission, after issuing a consultation on the Vnuk ruling, has taken steps to formally enshrine required insurance for off-road use of a motor vehicle in the Motor Insurance Directive. That process is expected to last through next year.