Robyn Coates

Lady Haldane refused the insurers attempt to recover losses from their policy holder who was not the driver after voiding the policy post accident.

The case background

The dispute arose from a road traffic accident in June 2017 involving multiple individuals in one vehicle. Ian Whyte, a passenger in the vehicle, was injured when the car, driven by David Arthur crashed. He as driver was uninsured at the time. The vehicle was covered by a policy of insurance obtained by Lauren Ruth Methven from UK Insurance Limited. However, this policy was voided in an undefended action in the Court of Session in September 2019.

It should be noted that the law no longer permits an insurer to void a policy under s.151 post-accident.  On 1 November 2019, the terms of s.152 of the Road Traffic Act 1988 were amended by regulation 6 of the Motor Vehicles (Compulsory Insurance) (Miscellaneous Amendments) Regulations 2019/1047.

The legal dispute

The central issue before Lady Haldane was whether section 151(8) of the Road Traffic Act 1988 would allow UK Insurance Limited to recover from Ms Methven, the settlement payments made to the Mr Whyte. Section 151(8) typically allows insurers to recoup payments made in respect of uninsured drivers from the policy holder.

UK Insurance had settled Mr Whyte’s claim in their capacity as an “Article 75 insurer” acting on behalf of the Motor Insurers’ Bureau (MIB). However, UK Insurance argued they retained direct recoupment rights against Ms Methven despite having voided her policy.

The arguments

Ms Methven’s legal team contended that once the policy was declared void, UK Insurance had no liability under section 151 of the Road Traffic Act. UK Insurance limited acted merely as an agent for the MIB, not under direct statutory obligation, in turn meaning that no right of recoupment existed for UK Insurance under section 151(8), when acting in an agency capacity.

UK Insurance argued that Section 151(5) allows recoupment to apply even after policy avoidance, as the declarator under section 152(2) doesn’t remove section 151 obligations. Ultimately, UK Insurance argued they should be entitled to recoupment regardless of their role as MIB agent

The decision

Lady Haldane ruled  in favour of Ms Methven, establishing a key legal principle; policy avoidance removes section 151 obligations for insurers.

The court found that a declaration under section 152(2) “releases the insurer from any obligation arising under section 151 of the Act to make payment.” This means that once a policy is successfully avoided, the insurer steps outside the statutory framework that would normally govern their obligations and rights.

The court also clarified that the MIB are an insurer of last resort. When an insurance policy is avoided, the individual becomes an “uninsured driver” for legal purposes, bringing the MIB into scope as the insurer of last resort. The court emphasised that this is the fundamental purpose of the MIB system – to ensure victims are compensated when no valid insurance exists.

Crucially, the judgment also clarified that insurers nominated by the MIB to handle claims under Article 75 of the MIB’s Articles of Association are “not liable to the claimant directly” but act only as agents of the MIB. As Lady Haldane noted, they are “standing in the shoes of the MIB”.

The court concluded that without direct liability under section 151, there can be no corresponding right to recoupment under section 151(8). The logic is straightforward: if an insurer has no obligation to pay under the statutory scheme, they cannot claim the benefits that flow from such obligations.

The broader context

The case provides much-needed clarity on the relationship between sections 151 and 152 of the Road Traffic Act 1988, resolving potential conflicts between policy avoidance and recoupment provisions.

Lady Haldane’s judgment shows the courts’ willingness to take a holistic view of the statutory scheme, preventing interpretations that would undermine its fundamental purposes. The decision aligns with European Union directives on motor insurance, which emphasise victim compensation over insurer protection.

Finally, the judgment reinforces the integrity of the MIB framework as the true insurer of last resort. It prevents insurers from circumventing the system’s protections and defences by claiming dual status.

Robyn Coates is a trainee at Balfour and Manson