Insurers beware – new regulations on post-accident 'declarations' set to come into force

Legislation has been laid before Parliament that limits the rights of insurers to rely on having voided an insurance policy after an accident has taken place.

The change is contained within The Motor Vehicles (Compulsory Insurance) (Miscellaneous Amendments) Regulations 2019. It was laid before Parliament on 1 July 2019 and is set to come into force on 1 November 2019.

Under section 151 of the Road Traffic Act 1988, insurers have a duty to satisfy court judgements against persons/risks they insure. Exceptions to this are provided for under section 152 of the 1988 Act. These exceptions mean that no sums are payable by an insurer under section 151 if certain criteria is met.

One such exception is if before, or within three months of, commencement of the proceedings in which the judgement is given the insurer obtains a declaration. This exception is relevant if the policy was obtained by non-disclosure of a material fact; or by false representation. If a declaration is obtained no sum is payable under section 151 of the 1988 Act.

The 2019 Regulations introduce a radical change – an insurer can only exercise this right if they have obtained a declaration before the event that gave rise to the liability.

No longer will notification of an accident, or a claim, or a court action give insurers notice to obtain a declaration and establish their right under section 152 of the 1988 Act. The 2019 Regulations specify that the declaration must be obtained before the accident takes place. The objection period for the Statutory Instrument that introduces the changes ends on 17 September 2019.