The Supreme Court held that a motor insurance policy did not cover a car owner’s liability for a fire caused while he was carrying out substantial welding repairs to his vehicle on his employer’s private premises. The policy had to be read so as to meet the compulsory cover required by the Road Traffic Act 1988, but the repairs were not a use of the vehicle on a road or other public place, and the damage did not arise out of any such use. The insurer was therefore entitled to a declaration that it was not liable.
A mechanic was welding his car in his employer’s workshops when sparks ignited flammable material inside it. The resulting fire spread to the premises. He had been carrying out repairs on private property and was outside the car when the fire began.
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Phoenix’s property and public-liability insurer, AXA, paid out more than £2 million and brought a subrogated claim in Phoenix’s name against Mr Holden. UK Insurance sought a declaration that the motor policy did not require it to indemnify him. AXA counterclaimed for an indemnity. Mr Holden took no part, because AXA undertook to limit its recovery to whatever, if anything, it could obtain from UK Insurance. The real dispute was between the two insurers.
The policy and the statutory requirement
Clause 1a of the policy booklet provided cover for the insured’s legal responsibility “if you have an accident in your vehicle” and killed or injured someone, damaged their property, or damaged their vehicle. The documents had to be read together. The certificate of motor insurance limited use to social, domestic and pleasure purposes and certified that the policy satisfied the requirements of the relevant law.
Section 145(3)(a) of the Road Traffic Act 1988 requires a policy to insure against liability for death, bodily injury or damage to property “caused by, or arising out of, the use of the vehicle on a road or other public place”. The parties agreed that the policy had to be construed so that its third-party cover met that requirement. The question was how far the wording had to be adjusted, and whether this accident fell within the cover once it had been adjusted.
The decisions below
Judge Waksman QC held that the policy was not confined to roads and public places, but that the other requirements of cover were not met. Repairing an immobile car, partly off the ground, was not using it. He also rejected the argument that the fire arose out of earlier driving or out of intended later driving. He held that the fire was caused by, and arose out of, the allegedly negligent repair, using grinders and welders without precautions for flammable materials in the car.
The Court of Appeal allowed Phoenix’s appeal. It treated the certificate as requiring clause 1a to be read as covering legal responsibility “if there is an accident involving your vehicle”. It held that this extended cover included commonplace repairs, and, as a secondary point, that the repairs amounted to “use” under section 145(3). The Master of the Rolls summarised the authorities as showing that use is not confined to driving, may include a parked or immobilised vehicle, includes anything consistent with the vehicle’s normal function, and that damage may arise out of use if use is a contributing factor in a relevant causal sense.
Why the Supreme Court disagreed
Lord Hodge, with whom Lady Hale, Lord Wilson, Lady Arden and Lord Kitchin agreed, first rejected UK Insurance’s new argument that the certificate supplied a separate strand of cover, so that clause 1a could be left with its ordinary meaning. The certificate forms part of the policy because it states the use limitations, and the insurer intended the policy to meet the Act. But the Chief Executive’s certificate distinguishes the certificate from “the Policy to which this Certificate relates” and certifies the policy’s legal effect rather than granting additional cover. The Act itself treats a policy and a certificate as distinct: the certificate evidences the policy, and the insurer’s duty to satisfy certain judgments looks to liability covered by the terms of the policy.
A corrective construction of clause 1a was nevertheless required. There was a clear contradiction between the ordinary meaning of “if you have an accident in your vehicle” and the certificate’s promise of compliance with the Act. Applying the approach in Chartbrook Ltd v Persimmon Homes Ltd, Lord Hodge held that this was one of the rare cases in which both the mistake and the intended meaning were clear, so rectification was unnecessary. The needed addition was only the cover required by section 145(3)(a), not a wider rewrite. The clause should be read as covering legal responsibility if the insured has an accident in the vehicle, or if there is an accident caused by or arising out of the insured’s use of the vehicle on a road or other public place. The Court of Appeal’s formulation went significantly beyond both the express words and the Act, and removed the statutory causal link.
Lord Hodge then addressed what the Act itself requires. English authority interprets “use” as extending beyond driving to having the use of a vehicle on a road or public place, including leaving a broken-down or long-immobilised vehicle there. The concern is that an uninsured vehicle in such a place may injure members of the public or damage their property. The words “arising out of” show that damage need not occur on the road itself, but there must be a reasonable limit to the causal chain. In Romford Ice and Cold Storage Co Ltd v Lister, the majority held that an accident in a slaughterhouse yard did not arise out of use on the road merely because the vehicle had travelled there. Dunthorne v Bentley was a close factual application of the same principle, not a wrong decision.
European case law, including Vnuk and Rodrigues de Andrade, gives the Motor Insurance Directive a wider reach: compulsory cover concerns use of a vehicle as a means of transport, which may include a stationary vehicle, and is not confined to roads or public places. Lord Hodge held that section 145(3)(a) could not be read down to achieve that result. Reading it down would go against the grain of the legislation, raise policy questions unsuitable for the courts, and impose retrospective criminal liability. In a dispute between private persons, where national law cannot be interpreted compatibly with the Directive, the insurance contract reflecting national law is not disapplied. The cover to be read into this policy was therefore the cover required by the Act: use on a road or other public place, with the statutory causal connection.
On that interpretation, substantial repairs to a stationary vehicle on private property were not “use” in the statutory sense. English cases treating use as “having the use of” a vehicle make sense where the vehicle is on a road or in a public place. They do not mean that a person conducting significant repairs to a stationary vehicle on private premises is using it. Nor did the damage arise out of use on a road. Earlier use may have contributed to the corrosion, and the repairs may have been a response to that disrepair, but it did not follow that the fire damage was caused by or arose out of use of the vehicle. Agreeing with Judge Waksman, Lord Hodge regarded that analysis as artificial: the fire was caused by the allegedly negligent repair. The suggested connection with past or future road use was too remote.
Verdict: The Court unanimously allowed UK Insurance’s appeal and restored the declaration that it did not have to indemnify the mechanic. Neither the policy’s express cover nor the cover required by the 1988 Act extended to this fire.
Source: R & S Pilling t/a Phoenix Engineering v UK Insurance Ltd [2019] UKSC 16
