Contributors
When a car is being repaired on private land, can it be said that it is being "used" as a vehicle under the Road Traffic Act 1988 (RTA)? The Supreme Court held that it could not and that the motor insurer was not liable for third party property damage caused by the insured's negligent repairs to the vehicle. We examine the Supreme Court's decision in R&S Piling T/A Phoenix Engineering v UK Insurance Ltd [2019] UKSC 16 and look at what is on the horizon in 2020.
The facts
Mr Holden was employed by Phoenix as a mechanical fitter and was the owner of a vehicle which was covered by a motor insurance policy with UKI (the Policy). On 11 June 2010, Mr Holden's car failed its MOT due to corrosion to its underside and as a result, Phoenix allowed Mr Holden to use its loading bay to carry out remedial works, including welding, to his car.
While carrying out the second set of welding works on the vehicle, Mr Holden answered a phone call. He then discovered flames inside the vehicle caused by the welding. The fire spread causing substantial damage to both Phoenix's and the adjoining premises.
Phoenix claimed under its property damage and PL policy in the sum of £2 million. Phoenix's insurer, AXA, made a subrogated claim against Mr Holden's motor insurer, UKI. UKI sought a declaration that it was not liable to Mr Holden as the vehicle was being repaired on private premises and the policy cover was limited by clause 1(a) as follows:
"We will cover you for your legal responsibility if you have an accident in your vehicle…"
First instance judgment
At first instance, the court held that the fire did not arise out of "use" of the vehicle, rather the negligent repair of the vehicle by Mr Holden and the policy did not cover the incident.
The Court of Appeal overturned this decision on the grounds that Clause 1(a) of the policy did not comply with EU law and was too narrow to comply with the RTA. As such, it adopted a broad interpretation of the policy's insuring clause which required UKI to provide cover wherever liability arises, not limited to "a road or other public place" (as per the Vnuk case[1]). In effect, this meant that the insuring clause should read:
"We will cover you for your legal responsibility if there is an accident involving your vehicle."
Supreme Court decision
The Supreme Court unanimously reversed the Court of Appeal decision recognising that neither domestic case law nor the jurisprudence of the Court of Justice of the European Union (CJEU) evidenced that "use" could be found to cover repairs to a vehicle on private property, such that motor policy coverage should apply.
UKI argued that Clause 1(a) did not require any interpretation to comply with the RTA, as the certificate of insurance acted as a standalone contract of insurance in line with the RTA. The Court dismissed this argument as the certificate was only evidence of the Policy itself, which contained Clause 1(a) and as such, Clause 1(a) did require interpretation to ensure compliance.
The Court affirmed the broad interpretation in Brown v Roberts [1965] 1 QB 1 which held that a person should have "an element of control, management or operation of the vehicle while it is on the road" to satisfy the term.
The Court's corrective construction stopped far short of the "radical" approach taken by the Court of Appeal and held that expansion of the Policy wording to meet the requirements of section 145(3)(a) RTA could not involve "cutting back" what was expressed in the Policy. Only corrections adding "that which is needed to make the cover comply with the RTA and no more" could be imposed and as a result, Clause 1(a) was read as follows:
"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 your use of your vehicle on a road or other public place…" (our emphasis).
The Court also considered that a causal link was created by the words "arising out of" and "caused by" and held that there must be a reasonable limit to the length of the relevant causal chain, with regard given to the "time, place and circumstance between the use of the car on the road and the accident". Phoenix argued that the disrepair was as a result of the use of the vehicle or was incidental to getting the vehicle back to a mode of transport. The Court held that the causal connection was too remote and UKI's appeal was therefore allowed.
Commentary
Insurers will welcome this clarity following the decision that the carrying out of significant repairs to a vehicle on private land does not constitute "use" of a vehicle under the RTA. Any attempt by the court to "read into" a policy will only be to ensure compliance with the RTA "and no more".
While Mr Holden's repairs were held to be sufficiently remote, caution must be exercised not to dismiss cases that may at first blush appear too remote. A case involving a motorist who caused an accident when she ran out of petrol, parked her car at the side of the road and crossed the road to seek help from a colleague was held to arise out of the "use" of her vehicle, due to the "borderline" proximity of the use of the car on the road and the accident[2].
Policies are often praised for their "plain English" usage. However, this case highlights the inadvertent risks this approach poses to crucial commercial protections. The key is to ensure that insurance policies are drafted wisely to ensure that insurers' true intentions are captured and communicated.
What is on the horizon for 2020?
In this case, it can be seen that EU law is adopting a far broader interpretation of "use" causing conflict with domestic interpretations. Parliamentary reform is therefore required to clarify the position between the RTA and EU law, however, in light of Brexit negotiations, EU law principles may no longer impact domestic law though court decisions may still impact this area in the interim negotiating period.
There is much uncertainty as to what the UK legislation will look like once any form of "agreement" is reached by the government with the EU. The government has stated that it wishes to remove the EU legislation that does not align with the UK's future plans and interests. It appears that most insurers would prefer that UK law continues to reflect EU law in order to allow ease of market trading across the continent, however, just how far the government will go in removing all trace of EU law from our vision (and the impact of this) remains to be seen.
As a result, insurers will be continuing to heavily focus on business contingency planning on issues such as passporting rights, employment, contracts and regulatory standards, to ensure that they successfully transition through the exit process.
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[1] Vnuk v Zavarovalnica Triglav dd (Case C-162/13) [2016] RTR 10
[2] Dunthorne v Bentley [1999] 1 Lloyd's Rep 560
