Getting hurt in far away places

by Whiskers

MIB v Moreno is the penultimate case of the legal year. It should not share the opprobrium of some cases rushed out carelessly by a de-mob happy judiciary eager to clear their desks before long vacation, but it feels rather unloved.  The result is probably the right one for those who value consistency, but I do prefer Moore-Bick’s Appeal Court judgment in Jacobs v MIB on precisely the same point. 

The case is about hurting yourself in faraway countries. Or more precisely, if you do hurt yourself, by what country’s law are your damages to be assessed?  The lex loci delicti, (the place where the accident occurred) as they call it on the continent, or the lex fori – domestic law?  There’s no obvious answer to this.  On the one hand lex loci delicti prevents arguments, especially when there are three nationalities involved eg a French man hits an English woman in Italy.  However once liability is established, then there’s a powerful argument for saying that damages ought to be assessed in the country where the victim lives. 

 This was illustrated by the case of Bloy v MIB which followed Jacobs.  The facts were tragic.  A baby and his mum injured by an uninsured driver, and the damages in the lex loci delicti (Lithuania) were capped and insufficient to compensate the baby for the lifelong care he was going to need.  This is how it used to be in the UK, as illustrated by the House of Lords case of Harding v Wealands.  Liability assessed by Australian law and damages with reference to UK law. 

Lord Clarke was clearly in grumpy mood and didn’t want to be there at all. He brought up Harding v Wealands even before the MIB’s counsel had got his ducks in a row.  Lord Clarke made it obvious that he wished poor Mr Mercer from Essex Court Chambers – a diffident but quietly determined advocate – would shut up and let him go back to deciding what books he was going to take on his hols.

Lord Mance and Lord Toulson were gentler and looked grateful for Mr Mercer’s comprehensive history of motor insurance in Europe. Mr Mercer’s junior was scarily clever Marie Louise Kinsler from 2 Temple Gardens.  She kept passing him notes and whispering the answer to all those nasty questions from their Lordships.

 The question, as Lord Clarke kept pointing out, was a simple one. If, as happened to poor Miss Moreno, you are a pedestrian hit by an uninsured Albanian driver in Greece, should Greek law decide how much compensation you get, or should English law? 

English damages for RTAs are more generous than most of Europe. So Miss Moreno clearly would have preferred those.  On the other hand, the scheme by which the Motor Insurance Bureau was liable to compensate her – Regulation 13(2) of the Motor Vehicles (Compulsory Insurance)(Information Centre and Compensation Body Regulations) 2003 (SI 2003/37)(“The Regulations”) – only allowed the MIB to claim damages back from Greece at the level they would have been in Greece.

 Now to put this in context, British drivers who hit people and things in Europe pay damages according to the law of the country where the prang happened. Also, if you’re hit by an insured driver in Europe, you get damages according to the lex loci delicti.  Why then should those with the misfortune to be hit by uninsured reprobates be better off. 

 Well why indeed? Unfortunately, as Moore-Bick LJ said, because our Regulations, which give effect to this diktat from Brussels – the Fourth Directive on Motor Insurance – (although quite a useful diktat in many ways) say that.   And although we now have a policy that UK legislation should be read in such a way as to give effect to EU legislation – the Marleasing case – you can’t just re-write UK legislation to make it compliant.  Or, as Lord Mance said, using Latin for extra gravitas, the court cannot act contra legem.

 Instead, what you have to do is make an application to the European Court of Justice who tells you that your draftspersons are rubbish and then Parliament has to change the offending law. Needless to say this is all a lot of fuss, and quite frankly why bother now that we’re out of there anyway? 

 Once we had been treated to a comprehensive history of motor insurance in Europe with extensive and close textual analysis by Mr Mercer, it was time for Mr Beard to rise. He seems not to have bought a clever little friend along with him.  There was a teenager in the solicitors’ benches, who might have been there on work experience, and behind him four civilians who presumably had come down to London to see justice done.  Although they sat very still and listened attentively, one had to wonder whether it’s kind to force non-combatants to undergo this type of experience.

 Lord Hodge regarded Mr Beard with less impatience, perhaps because Mr Beard did not want to give a revisionist version of the history we had heard. Mr Beard talked much about people having “to lump it”.  Lumpage is a new term of art for when you find yourself on the wrong end of a conflict of laws point, I think.  Lumpage was regarded as a Bad Thing, but a necessary evil, especially when Regulations which were supposed to implement EU law smoothly, without any fuss turn out to do just the reverse.  He resisted all the onslaughts of all five justices, and maintained his submissions of fidelity to the laws of the UK as drafted. 

 You decide: when an SI – a baby law – says this…

 the compensation body shall compensate the injured party in accordance with the provisions of Article 1 of the second motor insurance directive as if it were the body authorised under paragraph 4 of that Article and the accident had occurred in Great Britain.

What’s your reaction?   Act as though the accident had indeed happened in GB. Seems logical? 

Ultimately, though, it was not to be. The Supremes bowed beneath the weight of history and succumbed to the siren songs of pan-European tortious conformity.  

 The words of legal fiction – as if the accident had occurred in the Great Britain – were held merely to extend the existing scope of the MIB’s compensatory liability, not to set out the basis for assessment of loss.

 So, Brexit may be coming some day, but this doesn’t stop their Lordships liking their law nice and tidy. Anomalies are bad, even if Moore-Bick could live with them.

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Tell me Sweet little Lies

Versloot Dredging v HDI Gerling Versicherung Industrie AG

[2016] UKSC 45

Should an action be sanctioned according to its actual consequences or is dishonesty itself worth of adverse sanction? Should we punish dishonesty pour encourager les autres, especially where fraud is rampart and difficult to detect?

 Those of you who were fortunate enough to have done jurisprudence will be familiar with the debate, and no doubt this case brought back happy memories of sunlit tutorials to the Supremes.

This is an important case.  On the glorious 12th, not only will we be able to shoot grouse, the fresh faced Insurance Act 2015 will come into force.  (I went to an utterly incomprehensible talk about it by a clever young lad from Fountain Court back in the spring, but still feel unprepared for this glorious day.) The Marine Insurance Act 1906 is amended, but has been given a makeover for the cuddly exigencies of the new millennium.

What the fresh-minted Insurance Act 2015 doesn’t tell us, though, is what a “fraudulent claim” actually is. How rotten is rotten?  This case tells us what “fraudulent claim” isn’t. 

So back to my introductory question, if I set out to do a naughty thing, but do not succeed, should I suffer adverse consequences?  Let’s look at this in the insurance claim context, on a sliding scale.

I set fire to my factory, because it’s making a loss and I need the money from the insurance policy?  Fraudulent/Not Fraudulent?

I think we are all clear on that one. Getting the matches out is way more culpable than falsehoods.  

I pretend that I had ten Hermes scarves in my genuinely lost luggage, when all I had was a few bits and bobs from Primark;  fraudulent/not fraudulent?

Ten’s probably taking the p***.  How about one or two, though?   It’s only an insurance company after all. I suspect most of the readers of this blog probably wouldn’t exaggerate their claim.  Nor would I.  It’s just rather tacky.  And anyway how many Hermes scarves does a girl need?

Now what about when my house is broken into.  In my insurance claim, I say I returned home on the last train, but I didn’t notice anything until next day, when I surfaced with my hangover? 

The truth is that I didn’t go home at all that night.  But I don’t want my husband, (who’s on holiday with the kids) to find out that actually I went home with my  hot new personal trainer, Danny.

 I’m telling a porkie, not to bolster my claim, but so as not to upset the matrimonial apple cart.  Fraudulent? Something we’d all do? Enough to let the insurers wriggle out of their contractual obligations?

Of course, gentle reader, you are not the sort of moral reprobate that would go home with a person to whom you were not married for carnal purposes.  So this wouldn’t apply to you.  But if you were?  Wouldn’t that little white lie be practically a moral imperative?

In this case, the DC Merwestone, an old workhorse of a ship, was wending its way back to the Netherlands from Lithuania.   One of the crew left the wrong tap open and the cruel sea flooded into the engine room causing €3.2m worth of damage.  

The Owners didn’t want tedious and lengthy investigations about the ship’s seaworthiness, and suggested to the Insurers that it was a faulty bilge alarm, or perhaps a stray albatross had caused the mishap.  It wasn’t a very enthusiastic porkie, nor one that they persisted in. As it happened, they were insured for the loss anyway, and but for their porkie, the Insurer would have had to pay out.  The ship was seaworthy too, but they weren’t giving the Insurers a chance to delay a badly needed payout.

 The term of art for this kind of postmodern view of the truth is “a fraudulent device”.  At first instance, Popplewell J held that the Owners were hoist on their own petard and the Insurers had acted lawfully.  He clearly felt unhappy with his decision, though, but was bound by the very firm 2002 judgment of Mance LJ in The Aegeon.

The result is that Gerling got to avoid a contract because the society has traditionally held insurance contracts to be “special”.  Like fiduciaries, a higher standard of probity is expected from policy holders in an insurance contract.  Traditionally insurance contracts have been uberrimae fides.   The “informational asymmetry” merits the law’s special protection.   

What level of protection is appropriate in these egalitarian, fair-minded days.  Should one half-hearted little fib entitle the insurer to a sin tax of potentially millions of pounds?

No, said Lord Sumption, giving the leading judgment. He rebadged “fraudulent device” as “collateral lies”, and came to the conclusion that this mollycoddling of the insurance industry was out of date.  Perhaps such preferential treatment was justified by social context in 1906 when McKenzie Chambers put pen to parchment, but it was wholly inappropriate now.  Dishonesty without consequences should not be so severely punished.  His is a fine, rigorous and historically grounded judgment, where policy is modestly clothed in precedent to give a tailored finish. 

 Lords Clarke and Toulson had a brief assenting chunter, but it was criminal/family judge, Lord Hughes really got his teeth into it.  It would be sneery of me to imagine him saying to himself “Finally, “dishonesty!  I know what that means!”  His judgment is more nuanced than Sumption’s, but essentially comes to the same conclusion.  The court has no business sanctioning mere lack of moral hygiene.

 So it was left to Lord Mance to defend the moral high ground, and his position in The Aegeon.  Any lie is bad, he said.  The informational asymmetry between insurer and insured merits the greatest solicitude.  Any tolerance of dissimulation fosters an environment where fraud can flourish.  It is artificial to draw a distinction between a lie’s intention and its consequences.  The judgment is couched in utilitarian terms, but there is a ring of genuninely held belief.  A lie is a lie.  And that’s all there is to it.

 So back to our examples. The arsonist is not let off the hook, nor the embellisher of genuine claims.  A policy holder with a genuine claim, who tells lies in order to facilitate their claim or save their marriage does not however suffer forfeiture.  Does that feel right?  I think that’s probably a matter of personal taste.

 This  judgment is bad news for the industry, but then so is the new Act. I’m guessing there’s going to be a lot of litigation as insurers work out where they are. 

Note that this judgment deals with the common law position.  If Insurers want to put in anti-fraudulent device wording in their policies, they can, providing that they comply with the transparency requirements of the legislation.

Bailii judgment

Post script:  the DC Merwestone was repaired and continues to plough her weary furrow.