Dodson v Peter H Dodson Insurance Services

Whether cover for driving other vehicles continues after disposal of the insured vehicle depends on the objective construction of the particular policy, read as a whole and in context. Earlier authorities do not establish a universal rule that such cover always ends on sale. Where the relevant indemnity is independently worded, contains no requirement that the other vehicle be used temporarily or instead of the insured vehicle, and the replacement-vehicle provisions allow a gap between disposal and replacement, cover may continue. A maintenance condition requiring reasonable steps to maintain the insured vehicle does not, without more, terminate separate cover for driving other vehicles. Any real ambiguity in standard insurance wording is construed against the insurer, which should state any retention or replacement condition clearly.

The claimant brought negligence proceedings against insurance brokers after Eagle Star declined to indemnify him for liabilities arising from an accident while driving his mother’s car. He had sold the car insured under an annual policy but had not yet acquired a replacement. The brokers contended that the policy continued to cover his driving of other cars and that their advice was therefore correct.

On an agreed preliminary issue, Bell J declared that cover under clause 1 continued after the sale. The brokers appealed with leave. The central question was whether the other-vehicles indemnity in clause 1(1)(b) was conditional on the claimant retaining or replacing the insured vehicle.

Appeal dismissed. Lord Justice Mance delivered the judgment of the court. Bell J’s declaration that the claimant remained covered under clause 1 during the remainder of the policy period was upheld.

1. Construction of the policy. The issue was one of contractual construction. Each policy must be construed according to its own wording and context. Earlier decisions establish the objective construction of the policies before the court unless there is a material difference in wording or context; they do not impose a general rule for all motor policies. The reference in Tattersall v Drysdale to the subject-matter of insurance was shorthand for a contractual conclusion, not a reference to insurable interest.
2. Other-vehicles indemnity. The proposal and premium were principally related to the insured vehicle, so cover for driving other vehicles was ancillary. That did not make it conditional on continuing ownership. Clause 1(1)(b) contained no wording equivalent to an extension clause, no requirement that the insured vehicle be out of use, and no requirement that use of another vehicle be temporary. The second reason in Boss v Kingston was therefore too narrowly expressed as a general proposition.
3. Replacement provisions. Clause 11(1) imposed no period within which a replacement had to be acquired. It necessarily allowed some gap between disposal and replacement. That gap could not be confined to a merely de minimis period, since such an approach would create uncertainty and could cause cover to cease at an arbitrary point.
4. Maintenance condition. Clause 11(5), read with clause 11(8), required reasonable steps to maintain and safeguard the insured vehicle. It postulated continued possession but did not axiomatically require retention of the vehicle or terminate cover under clause 1(1)(b). Whether those conditions were confined to loss or damage to the insured vehicle, or liability while driving it, was left open because the point had not been argued.
5. Ambiguity and final order. The reasoning in Boss was regarded as substantially doubtful, and the present policy was materially distinguishable. In any event, real ambiguity in standard insurance wording had to be construed against the insurers. The appeal was dismissed, leave to appeal to the House of Lords was refused, and the declaration was upheld.

1. Court of Appeal In [2000] EWCA Civ 320, the court dismissed the brokers’ appeal and upheld the declaration that cover continued after the claimant sold the insured vehicle.
2. Queen’s Bench Division Bell J’s order of 17 February 2000 declared, on the preliminary construction issue, that the claimant remained covered under clause 1 despite the sale of his car.