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March, 28, 2019
The Supreme Court has today handed down judgment and overturned the Court of Appeal’s decision such that UK Insurance is entitled to a declaration that it has no liability for a fire occurring on private land where the vehicle was not at the time being used as a means of transportation. However the judgment has wider implications (beyond the obvious issue of interpretation of the particular policy in question) but an opportunity to provide greater clarity as to the law around ‘use’ has not been grasped.
In this case, Mr Holden had been undertaking weld repairs to the underside of his car (to enable it to pass an MOT test) in the loading bay of his employer’s premises (the Respondent trading as Phoenix) when a fire started which caused circa £2 million of damage to the employer’s premises and a neighbouring premises. The case concerned whether Mr Holden’s assumed liability was one covered by his motor insurance policy with UK Insurance trading as Churchill Insurance.
At first instance the High Court judge ruled that the Policy did not cover the loss. The Court of Appeal ( EWCA Civ 259) overturned that decision on the basis that (a) the Policy was required to cover all liability required to be covered by section 145(3)(a) of the Road Traffic Act 1988 and (b) section 145(3)(a) when interpreted in accordance with EU law, needed to provide cover not simply limited to a road or other public place, but wherever the liability arose (as per Vnuk v Zavarovalnica Triglav dd (Case C-162/13)  RTR 10). Accordingly the Court of Appeal significantly amended the meaning and effect of the insuring clause so as to provide cover in respect of Mr Holden’s negligent acts.
The Supreme Court’s decision is unanimous with Lord Hodge delivering the court’s judgment. It is crucial in understanding this case to first appreciate that Churchill’s policy incorporated the certificate (as well as the schedule and proposal confirmation) into the policy. Not all insurers incorporate the certificate into the policy; for example some insurers merely provide that the certificate details the types of use covered (e.g. social domestic and pleasure “SDP”, business use etc).
The Motor Vehicles (Third Party Risks) Regulations 1972 (SI 1972/1217) sets out the requirements for the form and content of a certificate of motor insurance needs. In particular this Regulation requires the certificate to state:
“I/We hereby certify that the policy to which this certificate relates satisfies the requirements of the relevant law applicable in Great Britain.”
The impact of this statement being incorporated into the policy was that the Supreme Court read the third party insuring clause to state (with the additional words of “corrective construction” underlined):
“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 and:
Whilst widening the scope of cover (compared to the insuring clause being read in isolation), nevertheless the clause was not widened to the degree which the Court of Appeal had earlier proposed.
Whilst such additional words are not intended to prevent policies limiting cover to specified types of use (such as SDP: see for instance Bristol Alliance Limited Partnership v Williams and EUI Limited  QB 806) do motor insurers really want their policies to be read with such underlined words included? So far as Churchill were concerned in this appeal, they did not need to worry about such an addition because the liability of Mr Holden was held by the Supreme Court not to be a liability “caused by or arising out of the use of a vehicle on a road or other public place” both because of the location and because he was not ‘using’ the vehicle at the time.
In terms of the issue of location of the liability, the Supreme Court accepted that section 145(3)(a) did not comply with EU law as a result of the Vnuk decision of the CJEU (the government had already conceded as much in the RoadPeace case  EWHC 2725 albeit there is still no indication of when the government will enact amending secondary legislation). The Supreme Court declined to re-write section 145(3)(a) itself because of the significant implications of doing so and also stressed that it is important to recognise that “EU law does not require a national court, hearing a dispute between private persons, to disapply the provisions of national law and the terms of an insurance policy, which follows national law, when it is unable to interpret national law in a manner that is compatible with a provision of a directive which is capable of producing direct effect: see judgment of the Grand Chamber of the CJEU in Smith v Meade (Case C-122/17) 7 August 2018”. If a private individual suffers a loss in such a situation their remedy is against the government (see Francovich v Italy (1991) C-6/90; it should be noted that the right to bring such a claim will be significantly curtailed pursuant to the European Union (Withdrawal) Act 2018 if Brexit does happen).
In respect of whether Mr Holden was using the vehicle at the time of the fire, the Supreme Court held that he was not using the vehicle in accordance with section 145(3)(a):
“I would accept that the repairs may properly be said to have arisen out of the use of the car as they were a response to the disrepair of that vehicle. But it does not follow that the property damage which is the subject of Phoenix’s claim was caused by or arose out of the use of the vehicle as the RTA requires. In agreement with Judge Waksman, I consider it to be an artificial analysis to say that the property damage, which Phoenix and its neighbour suffered, was caused by or arose out of the use of the vehicle. As he stated (para 66 of his judgment), “[t]he 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”. It was Mr Holden’s alleged negligence in carrying out the repairs and not the prior use of the car as a means of transport which caused the relevant damage.”
Putting that another way, Mr Holden prior use of the vehicle (and future intended use) was too remote to the loss suffered.
The court did reaffirm that Dunthorne v Bentley  Lloyd’s Rep 560 was correctly decided but avoided wider considerations of cases concerning use – the English courts repeatedly point to the need to decide cases on their particular facts (not least in Dunthorne). Nevertheless the court did appear to look at the question of use as defined by section 145(3)(a) by reference to cases (such as Brown v Roberts  1 QB 1) concerned with whether there had been a criminal offence committed pursuant to section 143 (i.e. by using a vehicle without having compulsory insurance in place) – arguably use pursuant to section 143 is not necessarily comparable with use under section 145(3)(a) and there are, as the court recognised, good reasons for having a wide interpretation of use under section 143. The court did not go so far as to fall into the trap of saying that if Mr Holden was using his vehicle under section 145(3)(a) he therefore ran the risk of being prosecuted for an offence under section 143 and it certainly was not part of its thinking for allowing the appeal.
On one level this case is very much about the particular interpretation of the Churchill Policy to the facts of Mr Holden’s actions in seeking to repair his vehicle in the manner he did. The Supreme Court declined to provide wider guidance on the extent of what can amount to ‘use’ under section 145(3)(a) including by reference to EU law. The case is a further illustration of the difficulties assessing cases such as this but nevertheless the court’s decision highlights the need to apply common-sense (and we would submit that the decision does point towards Master Davison’s first instance decision in Wastell v Woodward (Deceased)  Lloyd’s Rep IR 474 being incorrectly decided). The decision (as with the recent Supreme Court decision in Cameron v Hussain) also highlights that perceived incompatibility between English and EU law certainly does not mean that the court will disregard English law.
It should also be noted that the Advocate General recently released a preliminary ruling in the Spanish case of Línea Directa Aseguradora, S.A. v Segurcaixa, Sociedad Anónima de Seguros y Reaseguros (2018/C 161/26). This concerned a car parked up for over 24 hours which then caught fire as result of developing an electrical fault (a small but inherent risk with vehicles). The Advocate General considered that the fire did arise from the use of that vehicle as a means of transportation. The difference being that in this Spanish case, there was no other more specific cause (i.e. negligently working on the vehicle). The difference is comparatively slight – further illustrating the difficulties with the question of ‘use’.
Some people were concerned that the Supreme Court could have delivered a judgment with very wide implications for motor insurers in terms of the extent of cover deemed to be provided. That fear has certainly not materialised. Nonetheless, as with the Court of Appeal’s decision, the case does highlight the difficulties of having a policy of insurance that incorporates the certificate into the wording. Insurers might therefore wish to consider whether they should continue to incorporate the certificate into the policy wording, particularly where they do wish to provide particular coverage restrictions (including those under consideration in Bristol Alliance) in relation the third party cover.