Insurer liable to satisfy judgment despite obtaining a declaration that they were entitled to void the insurance policy

In a rarely tested area of motor insurance law Judge & Priestley successfully argued that despite obtaining a declaration that an insurance policy was void, the defendant insurer was held liable pursuant to Section 151 of the Road Traffic Act 1988 (“RTA”) to satisfy a judgment obtained against the driver of the insured vehicle.

Proceedings were originally issued against the driver of the vehicle on the 3 August 2016. The driver did not acknowledge the proceedings or file a defence; consequently judgment in default was awarded.

The driver failed to satisfy the judgment, therefore copies were provided to the defendant insurer. The insurer did not satisfy the judgment; accordingly proceedings were issued to enforce the judgment against the insurer.

Unbeknownst to Judge & Priestley, the defendant insurer had applied for a declaration to avoid the policy on the 14 November 2016 and sought to rely on this as a defence to satisfying the judgment.

Section 152(2) Road Traffic Act 1988 (“the RTA 1988”) states the following:
  1. Subject to subsection (3) below, no sum is payable by an insurer under section 151 of this Act if, in an action commenced before, or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration—
    1. that, apart from any provision contained in the policy or security, he is entitled to avoid the policy under either of the relevant insurance enactments, or the security on the ground that it was obtained—
      1. by the non-disclosure of a material fact, or
      2. by a representation of fact which was false in some material particular, or
    2. if he has avoided the policy under either of the relevant insurance enactments, or the security on that ground, that he was entitled so to do apart from any provision contained in the policy or security.

It is widely accepted that Section 151/152 of the RTA 1988 is not an easy read however the critical mistake that the defendant insurer made was they could only rely on the exception in that section if an action to obtain the declaration had been made within three months of the original proceedings being issued.  In this case the defendant insurer was 11 days out of time.

It is therefore important for insurers, when considering taking steps to void a policy, that they do so at the earliest opportunity and without delay.

This article was written by Thomas, Outram-Haskins, Insurance Manager in the Credit Solutions team at Judge & Priestley LLP.


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