THE SCOPE OF RTA INSURANCE – A BROAD APPROACH

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 By Catherine Duffy

UK Insurance Limited and R&S Pilling T/A Phoenix Engineering [2017]EWCA Civ 259

Court of Appeal (Civil Division) – hearing date 29th March 2017

The issue was whether the motor insurance cover of the 1st defendant’s, Mr Holden, extended to liability for damage to the property of 3rd parties as a result of fire caused by repair work he was carrying out to his car at a time when it was immobilised.

The appeal was allowed and the court found that the 1st defendant’s insurer would be responsible for liability under the policy.

FACTUAL BACKGROUND

On 12/6/10 Mr Holden, a mechanical fitter employed by Phoenix was working overtime at Phoenix’s premises. The previous day his car had failed its MOT. Mr Holden’s employer agreed that he could do some work on his own car which would hopefully enable it to pass the MOT. His intention was to weld some plates onto the underside of the car to deal with the corrosion.

Whilst welding, sparks from the welding ignited flammable material inside the car. The fire spread and set alight some rubber mats close to the car. The fire took hold in Phoenix’s premises and the adjoining premises causing substantial damage.

Phoenix’s insurer was AXA. AXA paid out to Phoenix and the owner of the adjoining property in excess of £2m. Being subrogated to Phoenix’s rights AXA made a claim against Mr Holden in the name of Phoenix for an indemnity in respect of the sums paid out.

UKI commenced these proceedings in the London Mercantile Court of the Queen’s Bench Division for a declaration that it was not liable to indemnify Mr Holden in respect of any liability he may have arising out of his welding activities to his car on 12 June 2010.

Phoenix counterclaimed for a declaration that UKI was liable by the terms of the policy to indemnify Mr Holden in respect of the loss and damage suffered by himself and/or neighbouring occupiers arising out of the fire started by Mr Holden in his vehicle whilst he attempted to undertake repairs to it on 12 June 2010.

THE POLICY

The policy booklet (“the booklet”) stated that the policy was made up of, among other things, the booklet, the “Certificate of Motor Insurance” (“the certificate”) and the “Schedule” (“the schedule”). It stated that the certificate “provides evidence that you have taken out the insurance you must have by law”.

Section A of the booklet deals with liability to other people. It provides as follows:

“1a Cover for you

We will cover you for your legal responsibility if you have an accident in your vehicle and:

you kill or injure someone;

you damage their property; or

you damage their vehicle.”

The certificate contains the following certification:

“I hereby certify that the Policy to which this Certificate relates satisfies the requirements of the relevant law applicable in Great Britain …”

THE RTA

Section 143 of the RTA provides that it is an offence to use a motor vehicle on a road or other public place unless there is in force in relation to the use of the vehicle by that person such a policy of insurance or such a security in respect of third party risks as complies with Part VI of the RTA.

Section 145 of the RTA specifies the conditions which such a policy of insurance must satisfy. It provides as follows, so far as relevant to this appeal:

“(1) In order to comply with the requirements of this Part of this Act, a policy of insurance must satisfy the following conditions.

(3) Subject to subsection (4) below, the policy –

(a) must insure such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person or damage to property caused by, or arising out of, the use of the vehicle on a road or other public place in Great Britain, …”

At all times relevant to these proceedings, section 145(4)(b) provided that such a policy shall not be required to provide insurance in respect of damage to property of more than £1 million (now £1.2 million).

THE DIRECTIVE – Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009 relating to insurance against civil liability in respect of the use of motor vehicles

The Directive consolidates a number of earlier EU Directives requiring member states to take measures to ensure that civil liability arising from use of motor vehicles is covered by insurance.

Recital (2) of the Directive is as follows:

“Insurance against civil liability in respect of the use of motor vehicles (motor insurance) is of special importance for European citizens, whether they are policyholders or victims of an accident. It is also a major concern for insurance undertakings as it constitutes an important part of non-life insurance business in the Community. Motor insurance also has an impact on the free movement of persons and vehicles. It should therefore be a key objective of Community action in the field of financial services to reinforce and consolidate the internal market in motor insurance.”

Article 3 provides as follows, so far as relevant to this appeal:

“Compulsory insurance of vehicles

Each Member State shall, subject to Article 5, take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance.

The extent of the liability covered and the terms and conditions of the cover shall be determined on the basis of the measures referred to in the first paragraph.

The insurance referred to in the first paragraph shall cover compulsorily both damage to property and personal injuries.”

Article 12(3) provides as follows:

“The insurance referred to in Article 3 shall cover personal injuries and damage to property suffered by pedestrians, cyclists and other non-motorised users of the roads who, as a consequence of an accident in which a motor vehicle is involved, are entitled to compensation in accordance with the national law.”

The Directive is not of direct effect in the UK but so far as possible the RTA must be interpreted so as to accord with it.

 

THE JUDGEMENT

On 8 April 2016 His Honour Judge Waksman QC, sitting as a judge of the High Court, declared that the respondent, UK Insurance Limited (“UKI”), which provides motor insurance under the Churchill brand, was NOT liable to indemnify Mr Holden in respect of any liability arising out of the fire which occurred at the premises of the appellant on 12 June 2010.

As part of the judgement the judge considered whether the repair to Mr Holden’s car was a “use” of his car within the policy and the RTA. He said (at para. [46]) that, as a matter of impression and from first principles, he could not see how undertaking a repair to a car is in any sense a “use” of it. He said that there was no English authority directly in point. Having considered Dunthorne v Bentley [1999] Lloyd’s Rep IR 560 and a number of Canadian and Australian cases, he said (at para. [60]) that he did not accept that it is a “normal function” of a car to undergo repair.

Having rejected some arguments on this issue on behalf of Phoenix on the particular wording of the policy, the judge concluded (at para. [63]):

“the repair being undertaken to Mr Holden’s car was clearly not using it. It was not being operated in any way at all but was immobile and indeed partly off the ground so that it could be worked on”.

The judge then rejected Phoenix’s alternative argument that the fire arose out of the use of Mr Holden’s car – either because he had just been driving it, or because he drove it into the garage, or because he drove it in near mats on the floor which also caught fire, or because he would drive it afterwards, and points of that kind. He said:

“This is a wholly artificial analysis in my judgment. The fire was caused by and arose out [of] the allegedly negligent repair of the car by the use of grinders and welders without taking any precautions with regard to flammable materials in the car itself. For that reason these alternative arguments also fail.”

Finally, the judge said (at para. [67]) that, had he found the requisite use and causation, he would have held that there was an “accident” here because it was a fortuitous or unexpected incident.

The judge concluded (at para. [68]) that UKI was entitled to the declaration sought. He dismissed Phoenix’s counterclaim. The judge granted permission to appeal.

THE APPEAL

Phoenix appealed the judge’s order.

DISCUSSION AND CONCLUSION

Sir Terence Etherton MR

The appeal was allowed. The reasons were set out as follows:-

Scope of cover

I do not accept the submission of Phoenix that the accident on 12 June 2010 falls within the express terms of clause 1a of Section A of the booklet because there was an accident in Mr Holden’s car. The express terms of the policy cover Mr Holden’s responsibility ” if you have an accident in your car”. That only applied if Mr Holden was personally in the car at the time of the accident.

The judge accepted the argument of UKI that the cover in clause 1a is to be read as reflecting the words in section 145(3)(a) of the RTA, so that its proper meaning is: “We will cover you for your legal responsibility if there is an accident caused by or arising out of your use of the vehicle and you kill or injure … etc”

I do not agree with that interpretation, the effect of which is to narrow the cover in clause 1a in a way and to an extent not justified by the express language.

It is obvious that something has gone wrong with the language of clause 1a in that, as I have said, its express terms only cover liability if Mr Holden was in his car when the accident occurred. Such limitation of cover was plainly never intended. As the judge rightly observed that error is best addressed by treating the relevant wording as if it said: “if there is an accident involving your vehicle”.

The policy states expressly that the certificate forms part of the policy and so the two documents must be read together. I agree with the judge that the certification that the policy “satisfies the requirements of the relevant law applicable in Great Britain” means that the cover provided by the policy is to be read as extending to all the matters in section 145(3) of the RTA. This does not mean a narrowing of the cover provided by the express terms of the policy, as the judge seems to have thought, but an extension of cover insofar as the express terms do not embrace the matters specified in section 145(3).

If the cover under clause 1a of Section A of the booklet is interpreted as being extended not limited by section 145(3) of the RTA, and removing the express condition that Mr Holden be in the car at the time of the accident, the cover extends to the loss and damage caused by the accident which occurred on 12 June 2010.

I do not accept UKI’s contention that motor insurance cover is never intended to extend to such loss and damage or that no reasonable person in the position of the parties at the time the policy was entered into would have perceived that to have been the scope of the cover or that there is an insufficient causative link between the accident and the loss and damage to be indemnified under the policy. I consider the opposite to be the case where, as here, the car, having failed its MOT, was driven to a private location to be repaired, was manoeuvred into position to enable the repairs to be effected, the object of the repairs was to make the car safe and of the requisite standard to enable it to be driven, and the accident occurred by virtue of, and while, the repairs were being undertaken.

In any event, I respectfully do not agree with the judge’s conclusion that carrying out the repairs in the present case by Mr Holden was not “use” of the car within section 145(3)(a) of the RTA.

 

“Use of vehicle”

Sir Terence Etherton MR considered the case of Vnuk v Zavarovalnica Triglav D.D [2016] which gives authoritative guidance on the first paragraph of Article 3 of the Directive. The CJEU were asked to consider the concept of “use of vehicles”.

Sir Terence Etherton MR stated it is common ground that, in order to give effect to the Directive in the light of the decision in Vnuk, “use of the vehicle” in section 145(3) must be interpreted as including any use of the vehicle consistent with its normal function.

I consider that the repair work carried out by Mr Holden, in order to put his car into a safe and good working condition and so enable his car to pass its MOT, which it had just failed, and so enable him to continue to drive it, was a use of the car consistent with its normal function, applying a purposive interpretation to section 145(3).

That is consistent with the objective of the Directive to protect victims of accidents caused by motor vehicles, and the employment of the broad term “use” rather than “driving” or “operating” in the Directive. It is also consistent with the wide terms of Article 12(3) of the Directive quoted earlier. It reflects the reality that a car can pose a danger for others in its vicinity whether or not it is being driven; for example, from a fire or explosion due to petrol, oil or lubricants or if its brakes fail while parked.

It is also consistent with what was said in Pumbien at p.45 to be the object of section 143 of the RTA, namely “to protect the safety and property of other road users”.

It is also consistent with English authorities, such as Elliott, Pumbien and Dunthorne, that there may be use of a car within sections 143 and 145 of the RTA (or the predecessor provisions) even if a car is parked, or indeed immobilised.

The following propositions as to the meaning of “use of the vehicle” in section 145(3)(a) of the RTA can be derived from the Directive, the CJEU jurisprudence and the English authorities. (1) “Use” is not confined to the actual operation of the car in the sense of being driven. (2) There may be “use” of a car when it is parked or even immobilised and incapable of being driven in the immediate future. (3) “Use” of a vehicle includes anything which is consistent with the normal function of the vehicle. (4) Damage or injury may “arise out of” the use of the car if it is consequential, rather than immediate or proximate, provided that it is, in a relevant causal sense, a contributing factor.

I consider that it follows that the repair of a car, which the owner was driving but due to disrepair cannot be lawfully and safely driven, and which the owner wishes to effect as soon as possible in order to be able to drive the car lawfully and safely, is “use” of the car within section 145(3)(a) of the RTA, being an activity consistent with its normal function for the purpose of that statutory provision. Alternatively, injury or damage resulting from such repair in such circumstances arises out of the use of the car, for the purposes of section 145(3)(a), because it is, in a relevant causal sense, a contributing factor.

Sir Terence Etherton MR stated the judge made an error of principle in holding that a repair to a car is not using it, for the purposes of section 145(3)(a). I consider that his finding was wrong.

Lord Justice Beatson and Lord Justice Henderson agreed. The appeal was allowed.

 

POINTS TO TAKE AWAY

This is an important judgement for RTA insurer’s. It shows the court has adopted a relatively broad approach when looking at the proper interpretation of the insurance policy and the meaning and effect of section 145 of the Road Traffic Act 1988 and the Directive.

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