Motor insurers must bear the risk of policyholder fraud, says Nicholas Bevan
- Third party motor claims are immune to policyholder fraud or misrepresentation.
- ECJ ruling has far reaching implications for sections 151 and 152 Road Traffic Act 1988.
Can a motor insurer invoke its policyholder’s fraud to defend a third-party claim? ‘Yes’ according to the Court of Appeal’s interpretation of Pt VI of the Road Traffic Act 1988 (RTA 1988) in both EUI Ltd v Bristol Alliance Ltd Partnership [2012] EWCA Civ 1267, [2012] All ER (D) 120 (Oct) and Sahin v Havard & anor [2016] EWCA Civ 1202, [2016] All ER (D) 21 (Dec). In both cases it was held that the compensatory guarantee imposed by s 151 of RTA 1988 can even be circumvented by contractual exclusions and restrictions in cover. However, this orthodoxy was turned on its head by the European Court of Justice (ECJ) on 20 July 2017. The ECJ has ruled that a national laws that permit motor insurers to deny a third-party claim on the ground that the policyholder’s misrepresentation renders it void ab itio
