Bristol Alliance Ltd v Williams & Anor

Compulsory motor insurance must protect innocent third parties against liability for property damage caused by the use of a vehicle, even where the insured driver acted deliberately or criminally. An insurer may exclude such conduct as between itself and the insured driver, but that exclusion cannot defeat the third party’s statutory rights under section 151 of the Road Traffic Act 1988. This applies where the third party’s insurer exercises subrogated rights. The same result follows from the EU Motor Insurance Directives, which require compensation for third-party property damage and prevent insurers relying on contractual exclusions against victims, subject to specified exceptions.

The claimant’s property insurers paid for damage caused when the first defendant’s car collided with a store. They brought a subrogated claim against him and obtained judgment. The motor insurers were joined because the claimant sought to enforce that judgment against them under section 151 of the Road Traffic Act 1988.

The motor insurers contended that the collision was deliberate and therefore excluded by the policy. The preliminary issue was whether the claimant could recover from the motor insurers if that contention and the policy terms were correct.

1. The preliminary issue was answered in the affirmative. The motor insurers remained liable to satisfy the judgment under section 151 of the Road Traffic Act 1988.
2. Section 145 requires cover for liability for property damage caused by, or arising out of, the use of a vehicle on a road. The statutory purpose is to protect innocent third parties from harm caused by dangerous and criminal drivers. That purpose would be defeated if an exclusion for deliberate acts could be relied on against the victim.
3. The court preferred the reasoning of Laws LJ in Charlton v Fisher [2002] QB 578. A policy may exclude deliberate conduct as between insurer and insured, while still being treated, for the purposes of compulsory insurance legislation, as covering the insured’s liability to an innocent third party. The policy’s express exclusion therefore did not defeat the claimant’s section 151 claim.
4. The claimant remained a victim for the purposes of the EU scheme, notwithstanding that its property insurers had paid the loss and were exercising subrogated rights. The reasoning in Bernaldez was not confined to intoxicated driving. Applying Marleasing SA v La Comercial Internacional de Alimentacion SA C-106/89 [1990] ECR I-4135, Part VI of the RTA had to be interpreted consistently with the Directives’ protective purpose.

First-instance decision. No prior appellate decision is stated in the judgment.