R & S Pilling t/a Phoenix Engineering v UK Insurance Ltd

Compulsory motor insurance under section 145(3)(a) of the Road Traffic Act 1988 covers liability for damage caused by, or arising out of, use of a vehicle on a road or other public place. Use includes having control, management or operation of an immobilised vehicle in such a place. The causal chain between that use and the damage must remain within reasonable limits.

An insurance policy promising statutory compliance may be corrected where its language plainly fails to provide the required cover. The correction must add only the cover required by statute. Substantial repairs to a vehicle on private premises are not statutory use, and damage caused by negligent welding is too remote from the vehicle’s earlier road use.

An employee carried out extensive welding repairs to his car at his employer’s private premises. Sparks ignited material inside the car, and the resulting fire caused substantial property damage. The employer’s insurer brought a subrogated claim against the employee and sought recovery under his motor policy.

The High Court granted the motor insurer a declaration of non-liability in [2016] EWHC 264 (QB). The Court of Appeal reversed that decision in [2017] EWCA Civ 259, construing the policy as covering any accident involving the vehicle and holding that the repairs were use of the car.

The central issues were the cover required by section 145(3)(a) of the Road Traffic Act 1988, the correction needed to make the policy comply with that provision, and whether the fire fell within the policy as corrected.

1. Appeal allowed unanimously. Lord Hodge, with whom Lady Hale, Lord Wilson, Lady Arden and Lord Kitchin agreed, held that the insurer was entitled to the declaration granted by the High Court.

2. The certificate of motor insurance did not create a separate strand of cover. It certified the legal effect of the policy and stated its permitted uses, but the statutory distinction between a policy and its certificate showed that the required cover had to appear in the policy itself.

3. Section 145(3)(a) of the Road Traffic Act 1988 requires insurance for liability arising from death, injury or property damage caused by, or arising out of, use of a vehicle on a road or other public place. Use extends beyond driving. It includes having control, management or operation of a vehicle parked or immobilised in such a place. The words “arising out of” permit damage elsewhere to be linked to road use, but the causal chain must remain within reasonable limits.

4. The domestic provision could not be interpreted to reproduce the wider protection required by the EU Motor Insurance Directive, which extends to use of a vehicle as a means of transport irrespective of location. Such a reading would contradict the legislation, create policy consequences beyond judicial competence and risk retrospective criminal liability. In a dispute between private persons, EU law did not require the incompatible national legislation or corresponding policy terms to be disapplied.

5. The insuring clause contained an obvious linguistic mistake because, read literally, it failed to provide the cover which the certificate promised. Corrective construction was therefore available. The correction had to add the statutory cover and no more. The Court of Appeal’s formulation, covering any accident involving the vehicle, wrongly removed the statutory requirements of geographical use and causation.

6. The clause was to include cover where an accident was caused by, or arose out of, the insured’s use of the vehicle on a road or other public place. The contra proferentem rule and regulation 7 of the Unfair Terms in Consumer Contracts Regulations 1999 did not justify a broader correction where the mistake and intended statutory meaning were clear.

7. Substantial repairs to a stationary vehicle on its side at private premises were not use of it for the statutory purpose. Although earlier road use might have contributed to the corrosion necessitating repair, the fire and property damage arose from negligent use of grinders and welders. Their connection with the earlier road use was too remote.

1. United Kingdom Supreme Court: Allowed the insurer’s appeal in [2019] UKSC 16 and restored its entitlement to the declaration granted by the High Court.

2. Court of Appeal: In [2017] EWCA Civ 259, allowed the employer’s appeal and construed the policy as covering an accident involving the vehicle. It also held that the repairs amounted to use under section 145(3)(a) of the Road Traffic Act 1988.

3. High Court, Queen’s Bench Division: In [2016] EWHC 264 (QB), granted the motor insurer a declaration of non-liability because the fire arose from negligent repairs rather than use of the car.