Taking out a third-party motor vehicle insurance cover is obligatory for all vehicles registered in a member state right until such time the vehicle is withdrawn from circulation, the Court of Justice of the European Union (CJEU) has recently affirmed. This obligation subsists even if the vehicle cannot be driven at some point in time due to its technical state.
EU law harmonises various aspects relating to motor vehicle insurance. One such aspect is the obligation on all EU member states to ensure that all motor vehicles on their territory are covered by a compulsory third party liability insurance.
The facts of this case were briefly as follows. On February 7, 2018, a Polish local government authority became the owner, by judicial means following a forfeiture order, of a vehicle registered in Poland. The vehicle was insured by the new owner on April 23, 2018. Given its poor technical state, the said authority decided to scrap the vehicle and the vehicle was deregistered on June 22, 2018.
In July, the authority received a fine from the Insurance Guarantee Fund for failing to insure the vehicle for the period from February 7 to April 22, 2018. The authority filed an action before the national courts claiming that, during the period at issue, it was not obliged to insure the vehicle since it could not be driven due to its technical state and, in fact, was stored away on private land during the period in caption. The national court seized of the case filed a preliminary reference before the CJEU, requesting guidance on the interpretation on the EU directive within the context of the case at hand.
The CJEU observed that the concept of a ‘vehicle’ must be interpreted objectively. The use which is made of or may be made of the vehicle in question or the intention of the owner or of another person to use it is irrelevant for this purpose. The technical state of a vehicle may vary over time and whether it may be restored to a state in which it is can be driven depends on subjective factors, such as the intention of its owner to carry out the repairs.
This obligation subsists even if the vehicle cannot be driven at some point in time due to its technical state
Should the mere fact that a vehicle is not, at a given time, capable of being driven be sufficient to conclude that it is no longer a ‘vehicle’, and hence, exempt its owner from the insurance obligation, would militate against an objective interpretation of the concept.
The court then went on to rebut the claim that insurance was not necessary since the vehicle could not be driven on account of its technical state and was, therefore, not capable of causing loss or injury. It maintained that the insurance obligation is not linked to the use of the vehicle as a means of transport at a given time or to whether the vehicle has caused damage.
Similarly, the intention to have the vehicle destroyed cannot of itself lead to the conclusion that the vehicle loses its status as ‘vehicle’ and thereby does away with the insurance obligation. The CJEU reiterated that the classification as a ‘vehicle’ and the scope of the insurance obligation cannot be dependent on such subjective factors, since otherwise legal certainty would be undermined.
The court emphasised that an interpretation to the effect that the obligation to insure a vehicle subsists at all times is necessary, primarily to ensure the protection of victims of traffic accidents and to guarantee that such victims are invariably compensated. Such an interpretation also ensures the smooth implementation of the right to free movement of both vehicles based in EU territory and of the persons travelling in them. It is only due to such an interpretation that member states can refrain from carrying out systematic checks on whether vehicles entering their territory from the territory of another member state are insured and hence, facilitate free movement.
The CJEU concluded by affirming that for a vehicle to be exempted from an insurance cover, it must be officially withdrawn from use, in accordance with the applicable national rules. This ensures objectivity in concluding that a ‘vehicle’ is no longer considered as such. The deregistration of the vehicle may be one such way as to how to go about it but EU law itself does not regulate the way in which a vehicle may be withdrawn from circulation. Consequently, any such withdrawal may be made in terms of the applicable national rules.
The interpretation of harmonised laws by the CJEU ensures consistency in approach and implementation of such rules by all member states. Such consistency bolsters the realisation of the four fundamental freedoms as the cornerstone of the EU’s single market economy and all the benefits ensuing therefrom, for industry and citizens alike.
Mariosa Vella Cardona, Freelance legal consultant