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One of my most read blog articles from last year was one which was less to do with any abilities I may or may not have with the written word, but more to do with the fact an insurance company had gone to the wall. It was the first such company to do so and was of probably some embarrassment to the new UK insurance regulator the Prudential Regulation Authority (PRA) since this happened on what might be termed a probationary period for them too. The insurance company in question is /was Millburn Insurance. Exact figures are to come out but rumours have been circulating since June last year that there was well over €1,000,000 in unpaid claims pertaining to “motorsport” and race teams – although I would anticipate the figure will be much higher.

The last time insurance impacted so heavily and negatively on the world of motorsport was around 2001 when the Independent Insurance Company collapsed. Michael Bright, the former chief executive was sentenced to seven years in jail for his part in the collapse of the company he founded with the Judge (Geoffrey Rivlin) describing Bright as the "architect and driving force" in covering up the company's perilous state of finances and said he "corrupted a lot of people along the way". Bright was disqualified from being a company director for 12 years and the Finance Director Dennis Lomas, 56, was given four years and ex-deputy managing director Philip Condon, 58, received a three-year sentence after they too were convicted of conspiring to defraud fellow "directors, employees, actuaries, auditors, reinsurers, shareholders, policyholders and others by dishonestly withholding claims data".

At its peak, it was a darling of the stock market, worth over £900m and Britain's ninth largest insurer. Its 2000 accounts showed it had made profits of £22m but the SFO alleged that these should have recorded a loss of "at least £180m". The SFO at that time described Independent's collapse as "one of the worst commercial disasters to occur in recent years in the UK".

New heights in insurance fraud ??

What precisely went wrong I am not party to, but all insurance companies have to pass tests of solvency. This is measured in different ways with insurance companies beyond just cash in the bank. Insurance companies survive on their own Re-insurance and in the case of the Independent their re-insurance was done with an Irish based insurer, who allegedly had Re-insurance with a company called the Independent. Net effect – there was no re-insurance and no solvency, made worse by the fact that all insurers have “open” years to allow for losses still so come in and honest insurers “reserve” for this at realistic rates. With the Independent outstanding claims simply tended to be reserved at £1 – just to keep files open on the system.

This fooled the auditors and regulators at the time into effectively over stating the formal “rating” of the Independent. The whole thing about the Independent was ultimately it was a charade – but it was a charade that masqueraded with a “rating” so the fact that they also wrote business endlessly at well below market rates only exasperated the situation further.

So wind the clock forward to 2013 and the collapse of Millburn Insurance. Who knows what is going to come out of the woodwork here. Begbies Traynor – the official administrators are held with high regards for their thoroughness in such matters (and are unlikely to leave any stone unturned), have been quoted as saying "Over the coming weeks we will be working hard to assess the company's financial position and agree the best course of action. It is a highly unusual event for an insurance company to find itself in administration; this is the first we have seen for almost five years" - insurance companies are not in the habit of just disappearing like this.

So are there similarities with the collapse of the Independent? It is too early to say of course, but the final facts will of course come out in time. Inevitably the story will go beyond what cash the company had and maybe there is a re-insurance question to be answered here too. I don’t think any of the directors came from the Independent so the final story will be different, just as planes crash for different reasons. The other key difference is that Millburn – although very established was “unrated” by any credit rating agencies. There are plenty of insurers that are unrated – indeed my own company Everitt Boles Motorsport Insurance Management had a fantastic relationship with Templeton Insurance in Isle of Man for seven years – but a changing tide of regulation made trading between us more complex, but Millburn was City based.

They accepted many different classes of insurance – including motorsport and the similarity here is NOT “motorsport” but like the Independent they underwrote motorsport business far too cheaply. In this particular case it was volatile On-Track crash insurance. There are race teams who have yet to see any money from claims that will this year be almost two years old. Inevitably some have been in contact and I have been horrified to understand not just the volume of business that was being written but the price it was being written at – and this was on the most volatile On Track insurance. Brokers who used Millburn would have fully understood just how under-priced the business was – especially if they were persuading or guiding Millburn on the rating.

Find your trusting insurer in London's East End

I confess I don’t understand why more teams did not ask more questions at the time about their insurers. A cursory internet check would have revealed at that time that Millburn had no website, were based opposite a car park in London’s East End, just round the corner from a brothel (this latter bit is what I gather from reliable sources you understand!!) . I have to be careful what I say – my first office was not far away either – but that was back in 1998, in 2012 regulation has consumed the world of insurance with transparency being a fundamental of the business even I could not find very much about Millburn. They did not go to great lengths to be found.

So Greeks and big wooden horses? We can make all the analogies we like, legally “let the buyer beware”, we are all told “if it is too good to be true – it probably is”.

Questions to ask of your On Track Insurance Broker

The track day season has started in earnest with Brands Hatch kicking off the season with their first day on 01st February. The full MSVT calendar can be viewed on their website but by way of summary Brands have produced the following dates so far: 

The 2013 Formula Ford Festival saw Justin Everitt of MORIS take pole position by a couple of hundredths of a second in the final of the Duratec Sports 2000 races this season.

The conditions started out as wet and finished as a small monsoon as Justin guided the unique March 09R to prime position on the Saturday in preparation for the race on Sunday.

Trevor Scott of Scott Racing Services commented: "Justin was having a frustrating time cutting through traffic on this short Indy circuit but once he had a clear track ahead he had no problem taking the car to pole position. It Should be a very exciting race tomorrow"

As part of a continued campaign of increasing awareness amongst MSA Licence Hodlers, MORIS had support from two of the MORIS Marvels (Anca and Julia) who continued with their research duties amongst drivers of the weekend. Under the "I'm insured - are you?" banner, MORIS continued to ask questions of drivers establishing their perception of the dangers, whether they carry insurance and what they considered to be reasonable costs for insurance. In addition to doing all this in the wet weather, the Marvels had Podium dutes to perform. It was fitting that as Justin was scooping pole position the Marvels were on hand for the presentation of the opening round of the Formula Ford Festival - won by Joey Foster.

"Probably the worst start of my life" commented Everitt. I got the car off the line perfectly on the warm up lap and figured I would be able to control the race if I could lead going into the first corner. Unfortunately come the big moment I got way too much wheel spin, the car felt it was going in every direction except for forward. It really was a stunning start..... the team were pretty stunned too and I never managed to recover from there. Am just gutted when we had so much hope" Tne moment it started to go wrong was caught on camera by Championship winner Robert Oldershaw who was third on the grid and was almost collected by Justin at the start.

On Track Insurance  |  Personal Injury Insurance for Race Drivers  |  MORIS Survey

Datatag have for many years supported Motorsport Race and Rally Insurance Services (MORIS) on-line Storage and Transit products that include the requirement for insured equipment to be Datataged. MORIS were the first motorsport insurance company to create such an association, starting with the on-line Kart Insurance.  Justin Everitt explained further:

As Datatag describe themselves - it is THE ART OF IDENTIFICATION. The concept of Datatag is very straight forward and takes advantage of state of the art identification technologies to permanently mark and protect property. Datatag makes your competition car, kart or motorbike identifiable to the Police and is virtually impossible for a thief to defeat. 

This acts as a significant deterrent to criminals who would be encouraged to look elsewhere and who prefer to operate where they can easily remove or change the original manufacturer's identification numbers or marks. When this does happen the stolen property is less likely to be identified and hinders the police further.

Datatag changes all this. The Datatag packs include literally thousands of unique identification marks or tags which can be permanently hidden within the insured competition car, kart or motorcycle. A thief is faced with the impossible task of removing every single identification mark - without damaging the stolen property. A tall order given the Police only need to locate and identify one or two of the marks to assist with a prosecution.

Datatag has made a major impact on reducing theft and the Crown Prosecution Service with a 100% successful prosecution rate when evidence has been supplied by Datatag.

"We have always been very greatful for Datatag's support and we are very pleased they have just announced a comprehensive Motorsport Datatag Kit" Commented Justin Everitt. "It is now the same pack and equipment that can be used accross the board for all competition cars, karts and racing motorbikes. It allows for not just these obvious items to be Datatagged but also all the typical equipment that comes with running a competition machine and especially the kit allows for trailers to be Datataged also. This helps us look after the insurers, reduce opportunist theft and justifies us being able to keep premiums at an affordable level".

On-Line Theft Insurance: Competition Cars  |  Kart Racing  |  Competition Motorbikes

Useful Links:   Theft Insurance FAQ's  |  Trailer Security  |  Datatag Contact Details

Motorsport Race and Rally Insurance Services - MORIS were again supporting this years annual Formula Ford Festival at Brands Hatch run by the BRSCC. MORIS have supported the BRSCC run Festival for many years and again elected to support the opening race of the weekend being Heat 1 of the Kent Class run over 12 laps. The 2003 Zetec and 2004 Kent winner Joey Foster took a comfortable win ahead of Team USA Scholarship driver Joey Bickers, with 2010 Kent victor Neville Smyth in third.

Dominic Ostrowski of the BRSCC commented "we are delighted to have MORIS supporting the Festival again and it seem fitting that ten years ago they were presenting to a slightly younger Joey Foster so in a funny sort of way history was repeating itself today".

Justin Everitt of Motorsport Race and Rally Insurance Services added "we have become attached to the Festival over the years. It is always a great event and the BRSCC do an excellent job to make everyone enjoy the weekend - even if the weather plays havoc at times - but this makes for some exciting racing of course"

On drivers on the podium were joined by two of the MORIS Marvels - Anca and Julia who were on hand to make presentation to Joey - and be on hand for a couple of pics of course. Both our Marvels were also continuing with the driver insurance survey that we started back in late August. The Festival provided the opportunity for a different and, in the main, younger driver to be questioned and asked how dangerous they considered their motorsport to be.

It was a busy day for MORIS also who were supporting the race winning March 09R driven by our own Justin Everitt. The qualifying was just before the Kent Ford race and Justin was able to steer the car through treacherous conditions to grab pole position by a matter of hundredths of a second from Craig Murray on the super slippery Lola. This was Justin's first pole position in the March - but the race was to be a different story.......

VIDEO - CHEAP accident insurance for MSA Competitors accounced by MORIS.co.uk

Right -  lets go back to basics – insurance for your car or bike is split into two “components”:

(1) Accidental Damage, Fire and theft (for the purpose of this we will ignore the “theft” bit since we have yet to find a car/bike that has been stolen while travelling at high speed and

(2) Third Party Liability. By law this is the bit you must have. There are two “elements” to this:

(2.1)  Bodily injury to someone else. to drive / ride on the public highway. 

(2.2) Damage to someone else’s property (their car / bike being the obvious)

So why don’t my insurers cover trackdays? It depends which “component” you are asking about.

(1) Accidental Damage: Some regular insurers will provide an extension* to their policy but this is damage to YOUR - but that is it!! (2) Third Party Liability: This is a different ball game.You have NO cover. You are on your own. There are no insurers who regularly provide third party liability cover for track days.

GULP!!! So does this mean I can be held liable? Technically, at law, YES

For how much? Who knows? … as a guide….your regular road insurance policy will show that for “bodily injury” the quantum is  “unlimited” and for third party property damage the minimum by law has to be £1m.

This is getting scary - what about the disclaimers? What about them? The disclaimers you sign are designed to protect the track and organiser first and foremost. They have their own public liability insurance policies to protect them and their cover will not extend to cover you hitting someone else. However, neither they or you - by law - can contract out of injury to someone else.

What does that mean? It means irrespective of what is signed and by whom, the duty of care and responsibility to others remains as fixed as ever at law.

This is getting me worried now….. OK – lets finish with the scary bits first. A few feathers have been ruffled recently and this whole issue has been thrown out in the open following a quite ridiculous decision by a judge.

It was ruled that because at track day was not a competitive race and was more akin to a “time trial” (yep, that’s what was said) then the standard of driving in such situations was comparable to that of a reasonable driver on the ordinary road.   

Was this the first such case? No…. and it also contradicts a previous test ruling. His Honour Judge Mitchell concluded that if someone crashes into you on a trackday, even if it is clearly their fault - then tough! The judgement followed a case where a driver under tuition collided with a track day participant who then sued for damages. In essence the judge's ruling is that anyone participating on a trackday is aware of the potential risks involved and has a choice of not driving on to the circuit. (Source: Circuitdriver.com, April 2007). The judge who made the more recent decision failed to appreciate what a track day is all about and is why a Press Release from Chaucer Insurance states:

“A track day is a non-competitive event that allows an individual to drive their vehicle outside of the Road Traffic Act requirements. There is no racing; lap timing; time, speed or distance targets; or winners and losers”

MORIS.co.uk state on their policies that a Track Day is defined as:

……a strictly non competitive (no timing, pacemaking or racing) day at a race circuit where road registered vehicles can be driven /ridden by individuals holding a full driving licence on a race circuit without speed restriction. Drivers must adhere to all safety briefings provided at the beginning of each trackday.

Further: “Trackday insurance is a limited cover and does not follow all of the conditions of standard motor insurance”.

So why did the judge in the more recent case not consider what Judge Mitchell had said? This is only County Court level and such rulings DO NOT create law that is set in stone. In other words – no legal precedent has yet been formally established.

Now I really am confused…. Where do I stand if I am involved in an accident on the track with someone else?

Nothing has really changed – everyone is in the same boat as they always have been – you are there at entirely your own risk, but this is what Justin Everitt says as an MSA licence holder and track day enthusiast:

“I would not be dissuaded by the recent court ruling which was only at county court level so THERE IS NO PRECEDENT SET IN LAW. There could be another case next week that would rule differently. The answer therefore is:

(1) trackday organisers need to tighten up on declaimers and point out in plain speak – that a track day might all end in tears and

(2) individuals have GOT TO TAKE THEIR OWN RESPONSIBILITY more and insure their car AND themselves!!.

"I am an insurance broker specialising in Track day insurance. My car will be insured against all the nutters out there, I will be insured against all the nutters out their who might put me in a wheel chair. I have NO cover for anyone else – they should take their own responsibility and insure their car/bike – AND themselves”.

By way of further comment Justin Everitt adds:
“If I read the Chaucer statement correctly, then driver A with the damaged car claimed from REIS for accident damage and was paid. Some bright spark within Chaucer decided it would be a jolly good idea to subrogate against driver B for causing the damage – so it was the insurance company themselves that instigated the whole proceedings not Driver A. This is a very odd thing to do and would imagine a fine company like Chaucer must be asking questions of themselves right now….”

What about stickers? We have sometimes wondered if there is merit with Trackday Organisers determining at the outset those who are and are not insured by virtue of displaying a sticker on cars / bikes saying - “I am insured” or “I decided not to insure and accept the risk is totally down to me”. What do you think?

OK, but I still don’t understand why insurers don’t provide third party cover on a track day? Why would they? Driving on the road we have speed limits, rules, codes and laws that establish boundaries. Follow these and any reasonable person should be able to drive quite safely – yet accidents happen on the road every day of the year. Going onto the open race track where you are allowed to go as fast as you like (or can) and where limits speed, adhesion and talent are being explored – is not something insurers want to entertain.

A trackday Insurer might be prepared gamble on the cover for a £60k GTR being destroyed but it is reasonably foreseeable that it is going to end in tears and a £2m lawsuit for the guy you put into a wheelchair is a different level of risk that insurers seek to avoid. Insurers are not under any obligation to insure hazardous activities. Would you feel comfortable as an underwriter in a big insurance company signing off on this as a great “opportunity” ?

There is also the ethical issue, no insurance company wants to be accused of opening Pandora’s Box for participants suing participants.

Is there really no place to get any third party liability cover? Hmmmm…… it IS sometimes possible to buy a Third Party Liability policy from the NON MOTOR insurance market. Usually such policies are bought by “high net worth” individuals who wish to protect their …….. well….. high net worth…..The only other worthy note is the only track day insurance provider who can offer Third Party PROPERTY Damage is Ryan Motorsport Insurance under their track day banner Insure My Track Day. They explain that they can provide cover to the Armco barriers for Nurburgring Nordschliefe and their policies automatically include cover for up to £2,000 of costs for the Armco truck attendance plus removal and replacement of Armco. There is an option on the quote request form to increase this sum insured to £4,000 for an additional premium.

Great – can I not have one of these policies? Well, the premium might be anywhere from £1,000 to £2,500 – IF there is a willing insurer around. It is a reflection of what a non motor insurer needs to charge just to put a policy on the books. The Limit of Indemnity might be capped at £2m. Quite frankly this all makes for a very expensive track day.

So what is the most practical answer? Everyone should insure against being hit by someone else. They should insure their car and themselves OR just accept the risks……