Section 147 of the Road Traffic Act 1972 states that a policy of insurance shall be of no effect in respect of the provisions of the Act unless and until a certificate of insurance has been delivered by the insurer to the policyholder. The certificate is evidence only that a policy of insurance exists which meets the provisions of the Act, and of itself has no relevance to any additional cover which may be written into the contract of insurance. It is not unusual, however, for insurers to make the operation of the policy as a whole conditional upon the terms of the certificate and this aspect will be discussed further. Once a certificate has been issued the insurer is obliged to honour its terms so far as Act liabilities incurred by the policyholder are concerned. He is only released from this responsibility when the certificate is returned to him for cancellation, or alternatively if the policyholder signs a statutory declaration to the effect that the certificate has been lost or destroyed. Section 148 of the Act, however, does permit the insurer to recover from the policyholder any sums that have been paid because of the provision of the Act where a right of cancellation existed. The provisions of this section are reinforced by a clause within the policy which draws the insurer’s rights to the attention of the policyholder. This does assume of course that the policyholder is financially capable of reimbursing the insurer.
The intent behind the Road Traffic Act was to protect the innocent third party involved in an accident with a motor vehicle. The certificate was designed to permit checks to be made to ensure that when a vehicle is being used appropriate insurance exists. To facilitate this, the certificate contains certain information which should, for example, allow a policeman to make an on-the-spot decision. The format of the certificate is controlled by the Motor Vehicles (Third Party Risks) Regulations 1972, which require that it be printed in black on white paper and contain the following information:
- registration mark or description of the vehicle;
- name of the policyholder;
- effective date of the commencement of the insurance;
- date of expiry of the insurance;
- persons or classes of persons entitled to drive;
- limitations as to use.
This is to be followed by authorisation by the appropriate Insurer.
The 1972 Act, however, makes it clear that statutory cover may not be conditional upon:
- the age or physical or mental condition of the person driving the vehicle;
- the condition of the vehicle;
- the number of persons that vehicle carries;
- the weight or physical characteristics of the goods that the vehicle carries;
- the times at which or the areas within which the vehicle is used;
- the horsepower or cylinder capacity or value of the vehicle;
- the carrying on the vehicle of any particular apparatus;
- the carrying on the vehicle of any particular means of identification other than any means of identification required under the Vehicles (Excise) Act 1971.
It follows therefore that a certificate of insurance cannot be issued describing the persons entitled to drive as being, for example, over 25. On the other hand, the terms of the actual contract of insurance are a matter between the policyholder and insurer and therefore, to continue the same example, an insurer can issue a policy excluding driving by persons under the age of 25. In practice this means that if a person of 21 is driving and is involved in and responsible for an accident, the insurer can refuse to meet all claims other than those which would fall within the terms of the Road Traffic Act. These he will have to accept, but he would have a right of recovery against the policyholder.
Registration mark or description of the vehicle
The Motor Vehicles (Third Party Risks) Regulations 1972 permit two forms of certificate; form A where the registration mark of the vehicle is set out in full, or form B where the registration mark is not used but the vehicle is described. Originally the form B style of certificate was intended for risks covering unspecified vehicles, for example policies issued to members of the motor trade which would cover ‘any vehicle owned by or in the custody or control of the policyholder’. In due course it became the practice to use the form B or ‘blanket’ certificate in respect of larger risks to avoid the necessity of issuing an individual certificate for each vehicle and the need to replace a certificate when a vehicle was sold and a new one purchased. In these circumstances a simple wording was used such as ‘any vehicle owned by the policyholder’. During the 1970s, it has increasingly become the practice to use this form of certificate in respect of individual vehicle policies, especially private cars.
The actual form of words varies from insurer to insurer, but in general terms the certificate is worded to cover any vehicle of a specific type owned by the policyholder or hired to him under hire purchase agreement. The situation therefore would be that a policy would be issued in response to a request to insure a specific vehicle and this will be supported by a certificate of insurance covering any vehicle owned by the policyholder.
Clearly the insurer cannot accept the situation that where a policyholder owns two vehicles the full cover of the policy operates in respect of both, although premium for only one vehicle has been paid. The policy would therefore carry a supporting clause which limits the cover operative in respect of vehicles not declared to the insurer. The cover provided under the policy in respect of non-declared vehicles varies from insurer to insurer, and the terms of any policy using an open or blanket certificate should be studied. The cover, if given, can range from full third party without any limitations as to time of notification to Act cover only or the provision of cover under the policy for a limited period from the time that the new vehicle came into the policyholder’s possession. It was stated above that the intention of the certificate of insurance is to permit a simple check on the existence of adequate Road Traffic Act insurance, but this has become far more difficult with the introduction of the open or blanket certificate. Increasingly, therefore, it has become the practice of the police to check with an insurer the validity of a certificate when they have had cause to inspect the document. The open or blanket certificate has many benefits, however. When he changes his vehicle the policyholder will have instant cover on the replacement vehicle subject to meeting the policy requirements about notification. From a broker’s and insurer’s viewpoint it avoids the necessity of issuing a replacement certificate whenever a policyholder changes his vehicle, and when coupled with the simplification of rating structures has led to a considerable reduction in the number of mid-term adjustments, with the resultant saving in workload and expense.
Effective date of the commencement of insurance
It is an offence under the Road Traffic Act to backdate a certificate of insurance. Care must be taken therefore in ensuring the correctness of the effective commencement date shown. Where a cover note has previously been issued covering the same vehicle, use and driving, then it is permissible to show the commencement date as that for the first date of the cover note issued, provided there has been no gap in cover. It would not be correct to issue the pre-prepared renewal certificate dating from the renewal date where the payment of premium had been delayed beyond the expiry of the fifteen-day cover note contained on the renewal notice. In these circumstances a fresh certificate would have to be prepared, operative only from the date that the premium was paid. It should be noted that no cover would exist in the interim period (i.e. after expiry of the fifteen-day cover note). To avoid any risk of backdating, some insurers show the time as well as the date of commencement.
Persons or classes of persons entitled to drive
The description of the persons can be said to fall under three main headings, as follows.
This is the most specific definition, with the individual names of any persons permitted to drive under the certificate and therefore the policy being identified. Under some classes of policy, particularly private car, a premium reduction is available if the policyholder is willing to limit the driving to himself or one other named person, or even to himself and his spouse. It is a reasonable assumption that if the driving of a motor vehicle is limited to one person the exposure to accident on the road is likewise limited.
An underwriter may also require all drivers to be specified by name in other circumstances, but also with the intent of limiting the risk. This would be a normal requirement for young policyholders — or for those insureds seeking cover in respect of high powered sports cars, for example.
Specification by relationship of drivers
The most obvious example is a limitation, in respect of a vehicle used for commercial purposes, to the policyholder and his employees. These would not be named specifically but by their general relationship of employment. In selecting an appropriate definition, the provisions of section 148 of the Road Traffic Act must be borne in mind. The example referred to earlier in this chapter of limitations to persons over the age of 25 would be unacceptable, for example.
The majority of certificates issued in respect of private car insurance fall under this heading. The persons permitted to drive under the policy are defined in general terms as any persons driving with the authority or permission of the policyholder.
Whatever the description of the person driving, the certificate will also contain a clause that its operation is subject to the person driving holding a licence to drive the vehicle, or having held or not been disqualified for holding or obtaining such a licence. Provided that it is recognised by the licensing law of the UK an overseas licence could meet these criteria. Mere failure to renew a licence to drive the vehicle does not invalidate the insurance cover. Once a suitable licence has been held, this represents adequate qualification for the certificate of insurance unless a subsequent disqualification has occurred. It should be noted that the certificate will specify a licence to drive the vehicle as described in the certificate. The licence must be appropriate to the type of vehicle covered by the insurance and not just a licence which will permit the driving of another class of vehicle. This is particularly important in respect of heavy goods vehicles, coaches and the like.
Limitations as to use
This section deals with motor insurance only in general terms, but motor insurers are asked to issue a variety of policies in respect of many different types of motor vehicles. The following general comments should, however, be noted. The two main areas of use are ‘social domestic and pleasure’ and ‘business’. The certificate may be so worded as to permit use by all permitted drivers for both business and pleasure, or alternatively to limit either the pleasure or the business use to certain specified persons only. The nature of the business use permitted under the policy will vary from certificate to certificate. It is normal to exclude use of the vehicle for hire or reward unless this is the nature of the policyholder’s business, in which case a special rating and terms will apply. It should be noted however that, arising out of the terms of the Transport Acts 1978 and 1980, motor insurers have given an undertaking that in respect of vehicles constructed to carry not more than eight passengers and insured under private car policies the use of the vehicle for car sharing and receipt of a payment from a passenger in these circumstances would not constitute use for hire or reward. The undertaking is subject to the vehicle owner or driver not engaging in car sharing as a business, and the monies received in respect of any journey from one or more passengers being only a contribution to the use of the vehicle for that journey and containing no element of profit.
The normal certificate will indicate that the policy does not cover use of the vehicle for racing, pacemaking, speed testing, and reliability trials or any similar use. These uses can be included in the policy once the underwriter is aware that the cover is required and has had the opportunity to underwrite the risk appropriately.
The insurance certificate is a legal document. Its production is necessary to relicense a motor vehicle or as evidence of insurance in connection with any police enquiry. As motor insurance premiums have continued to increase, a market for the sale of illegal certificates has become apparent. The certificates become available from two sources — by the theft of stocks of blank certificates from insurers or brokers, or by the forgery and illegal printing of such documents. Insurers take many steps to restrict this abuse — for example, it is not unusual for stocks of blank certificates to bear a serial number on the reverse, so that in the event of theft the police can be advised of an identification number and the source of the theft can be traced. In an attempt to identify forged certificates water marks have been introduced into the paper and the Motor Vehicle (Third Party Risks) (Amendment) Regulation 1981 permits the inclusion of a background pattern, monogram or similar device to make the alteration or photocopying of a certificate more difficult. Brokers who hold stocks of blank certificates on behalf of insurers must pay particular attention to the security of those stocks, including reasonable accounting for spoiled documents.
The current general form of certificate has existed with only minor amendments for almost eighty years. Alternatives are periodically suggested and consideration has been given to a form of certificate to be attached to the windscreen of the car. It would not be unduly difficult to produce such a document, but it has never been considered either practical or necessary.
The practical difficulties arise from the wide areas of cover given, particularly under private car policies. Not only do the majority of such policies permit the car specified to be driven by other people in addition to the policyholder, they will also offer third party cover while the policyholder is driving a car not owned by him. In these circumstances a single certificate can be evidence of acceptable insurance in respect of two vehicles at the same time, but clearly can only be attached to the windscreen of one. The provision of two certificates would not only increase the expense of handling motor insurance, but would enhance the possibility of abuse.