Background
In 2010 Mr Holden, a mechanic employed by R&S Pilling, used its premises (with permission) to seek to repair his car. The battery was disconnected and the car had been lifted on a forklift truck to allow welding to the underside, which resulted in a fire. Over £2m worth of damage was caused to R&S Pilling's and adjoining premises. R&S Pilling's property insurers, AXA, paid out and pursued a subrogated claim against Mr Holden and sought a declaration that Mr Holden's motor insurers, UK Insurance Ltd ('UKI') (through the brand Churchill) were liable to indemnify that claim. UKI sought a declaration that it was not liable to indemnify Mr Holden. R&S Pilling counterclaimed for a declaration that UKI was liable under the terms of the motor insurance cover.
His Honour Judge Waksman QC at first instance in the High Court ruled in favour of UKI, holding that UKI was not liable to indemnify Mr Holden in respect of any liability resulting from this incident. He also held that undergoing repairs was not part of the normal function of a vehicle.
Court of Appeal decision
Sir Terence Etherton MR, Beatson LJ and Henderson LJ in the Court of Appeal reversed this decision, ruling in favour of R&S Pilling.
Clause 1a of Mr Holden's motor policy stated:
"We will cover you for your legal responsibility if you have an accident in your vehicle…"
The certificate of insurance certified that the policy satisfied the requirements of the relevant law. However, Clause 1a was too narrow to comply with the requirements of the RTA. The Court of Appeal therefore held, bearing in mind that the policy was not limited to use of the vehicle in a road or other public place, that clause 1a should be read to state:
"We will cover you for your legal responsibility if there is an accident involving your vehicle" (emphasis added)
On the basis of this clause (and on the basis that "involving" encompasses a broad spectrum without any causative necessity) the Court of Appeal found that the motor policy covered the fire arising from the welding of the vehicle. UKI appealed that decision.
Supreme Court decision
In unanimously allowing UKI's appeal, Lord Hodge gave the lead judgment (with Lady Hale, Lord Wilson, Lady Arden and Lord Kitchin agreeing).
It was accepted that a motor insurance policy must comply with the RTA. The motor insurers had argued that the certificate of insurance should be treated as a stand-alone agreement to insure in accordance with the RTA, and clause 1a did not therefore need to be interpreted with reference to the requirements of the RTA. The Supreme Court dismissed this argument and held that a certificate evidences the existence of the policy but does not create a separate contract of insurance. As such, it was necessary that clause 1a complied with the requirements of the RTA.
The Supreme Court analysed the obligation to insure a liability "caused by, or arising out of, the use of the vehicle on a road or other public place" and considered the meaning of both "use" and "caused by or arising out of".
The "good sense" of a broad approach to "use" involving some element of control, management or operation of the vehicle was endorsed. The Supreme Court held that Dunthorne v Bentley [1996] had been correctly decided, a subject of much debate for many years, but only on its specific facts.
In addressing the requirement that the liability be "caused by, or arising out of" the use of a vehicle, the Supreme Court said that there must be a reasonable limit to the length of the causal chain (quoting Lord Birnam's reference in Malcolm v Dickson (1951) to the losses arising from the want of a horseshoe nail). The argument that the welding fire arose from the use of the vehicle on a road or public place, because its prior use as a means of transport had been the cause of the vehicle requiring repair, was dismissed as a causal link too far.
The Supreme Court held that it was necessary to read clause 1a so that it complied with both what was expressed in the policy and also the requirements of the RTA but, significantly, the interpretation should not go further than that. The Court of Appeal approach to the clause – "we will cover you… if there is an accident involving your vehicle" - was described as "much more radical" than that required by either the express terms of the policy or the RTA, and indeed was said to go further than the Motor Insurance Directive and CJEU decisions. The Supreme Court's approach was to add the requirements of the RTA to the express clause:
"We will cover you for your legal responsibility if you have an accident in your vehicle or if there is an accident caused by or arising out of the use of your vehicle on a road or other public place".
On the basis of the above interpretation of clause 1a, the incident was held not to arise from or be caused by the use of a vehicle on a road or public place, since the incident was caused by negligent welding, and not by some earlier link in the chain when the vehicle was driven. It was said that under both English law and the CJEU decisions, repairing a vehicle on private property did not entail "use of a vehicle".
Comment
The decision will be welcomed by motor insurers in restoring a reasonable limit to causation and indeed restoring the need for a causal link – which had been missing from the Court of Appeal's adopted clause 1a. By endorsing an approach to "cause by or arising out of the use of a vehicle" which required "close connection in time, place and circumstance between the use of the car on the road and the accident" the Supreme Court provides motor insurers with reassurance that they will not be required to meet any claim "involving" a vehicle or arguably where a vehicle is in any vicinity to an incident.
The Supreme Court's approach to the application of the RTA to the policy terms will also be well received by motor insurers. Comment was made that the policy had been written in plain English and as such lacked commercial precision. The decision provides useful guidance to those drafting policies across all classes of business. The Court of Appeal adaptation of clause 1a demonstrates the importance of striking a balance between a user friendly text, and documenting the intended agreement.
The Supreme Court also confirmed both that the RTA does not comply with the Motor Insurance Directive and that it cannot be interpreted so as to apply beyond roads and other public places. Recent CJEU decisions were discussed, including the distinction drawn in Rodrigues de Andrade (2017) between the vehicular function which is required to be insured and the machine function of a vehicle, which is not. It was acknowledged though that the Rodrigues decision came after the Court of Appeal decision in this case. However, it may be said that the CJEU decisions were of limited relevance to the Supreme Court decision given the acknowledged divergence of the RTA from the Motor Insurance Directive.
The Supreme Court provided obiter comment that repairing a vehicle on private land is not use of a vehicle "as a means of transport" with reference to the CJEU approach. These comments may well extend their significance following any amendments to the RTA, possibly staving off some future litigation as to the application of any amended legislation. The Supreme Court's support of a broad interpretation of "use" indicates some accord with the AG Opinion in Línea Directa Aseguradora, S.A. v Segurcaixa, Sociedad Anónima de Seguros y Reaseguras (C-100/18) on 28 February 2019. However, the AG's view on uses which may fall outside a transportation use would appear to be narrower than that of the Supreme Court. Linea Directa also concerned a car and a fire but one which occurred in circumstances which would probably fit with Lord Hodge's analysis of "use". Whether the AG's opinion matches in full the Supreme Court's approach to causation may well be the subject of further debate.
Contact
For further information, please contact Amy Jeffs, Director, on 0151 907 3303 or at amy.jeffs@dwf.law
