The court unanimously decided that neither UK nor EU law supports the view that “the carrying out of significant repairs to a vehicle on private property” entails the “use” of that vehicle for UK compulsory motor insurance purposes, as required in the Road Traffic Act (RTA) 1988.
Insurance law expert Elaine Quinn of Pinsent Masons, the law firm behind Out-Law.com, said the judgment would be “significant” for UK motor insurers and would clarify and area that “had been causing some concern” to the motor insurance sector.
"Usefully highlighted is the ongoing disparity between UK and EU law in the area. In the UK, for compulsory motor insurance purposes, the Court clarified that the 'use' of a vehicle must happen at 'a road or public place'. In those locations that use does include instances where the vehicle may be parked. EU law goes much further since recent cases like those between Damijan Vnuk and Zavarovalnica Triglav and between the Rodrigues de Andrades and José Manuel Proença Salvador, which have extended compulsory motor insurance requirements to private property locations,” Quinn said.
"Although the Supreme Court was only obliged to consider the domestic law position for this particular case, Lord Hodge said that the UK parliament may have to reconsider section 145 of the Road Traffic Act (RTA) of 1988 to bring UK law into line with the EU position. This may not be addressed at all in light of Brexit and the current political climate.” she said.
The case came to the High Court in 2016, after Thomas Holden accidentally set fire to his car while repairing it at his employer’s premises. The fire caused £2 million worth of damage.
The employer’s insurer Axa paid out, and began to pursue Holden’s car insurance provider, Churchill, for the money, under his third-party liability cover.
The RTA requires insurance policies to cover property damage liabilities "caused by, or arising out of, the use of the vehicle on a road or other public place". The dispute centred on clause 1a of Holden's car insurance policy, which said: "we will cover you for your legal responsibility if you have an accident in your vehicle and: you kill or injure someone; [or] you damage their property…" and included the required legal certificate of compliance with the RTA.
The High Court said that the policy did not cover the accident, because it had arisen out of the negligent way in which the car was being repaired. The Court of Appeal (CoA) disagreed. It found that the policy wording was inadequate and had to be interpreted with the RTA certificate wording. Given clause 1a had no geographical limitations the CoA construed it as follows: “We will cover you for your legal responsibility if there is an accident involving your vehicle”.
The Supreme Court overturned the CoA decision finding that this approach expanded the cover "significantly beyond both the express terms of the clause and the requirements of the RTA by removing the statutory causal link between the use of the vehicle on a road or other public place and the accident". It also said that this interpretation went beyond EU law requirements.
The Supreme Court said that clause 1a should be construed as giving effect only to the requirements of the RTA 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 the use of your vehicle on a road or other public place and…".
Applying this construction, the Court was satisfied that motor cover was not available for the accident because, the vehicle was on its side being repaired on private property and not being used as "a means of transport" as required by current EU Law. And a recent ruling by the Court of Justice of the European Union in a dispute between David Smith and Patrick Meade, provided that national legislation should govern where there was a conflict with the EU provisions. Any person disadvantaged by a failure to provide cover available under EU law "could seek compensation from the member state," it said.