Double insurance: commercial fleet or private motor?

19 May 2020

In Axa Insurance UK Ltd. v EUI Ltd. (t/a Elephant Insurance) [2020] EWHC 1207 (QB), an accident occurred when a courtesy car, driven by X – loaned whilst his own vehicle was undergoing repair – was involved in a collision with another vehicle driven by Y, who sustained serious injury. At the time of the accident, X was on his way home from work but travelling to a local station to collect a friend.  

The claimant insurer, which had issued a fleet policy covering the repairing garage’s courtesy cars, sought a declaration that a private motor insurer was required to share in the liability for an accident owing to that policy’s ‘driving other vehicles’ (DoV) extension.

The commercial policy covered:

  1. Any motor vehicle the property of the policyholder or in the custody or control of the policyholder in connection with the business;
  2. Any person driving on the policyholder's order or with its permission;
  3. Use for business purposes by any person named above.

However, the private motor insurer asserted that it had no liability whatsoever under its DoV extension on two bases:

  1. The courtesy car was not a “private motor vehicle…[being] privately owned…[and] designed solely for private use”, and

  2. Cover under its policy was limited to “use for social, domestic and pleasure purposes only”.

If either of these submissions was accepted by the court, the private motor insurer would have no liability for the accident, and it would be the fleet insurer alone that would be required to meet Y’s claim.

The decision

  1. The courtesy car was not a “private motor vehicle” within the meaning of the DoV extension; it was a convenience offered to customers to encourage their patronage to the insured business and clearly – at [38] – “operated or supplied in the course of or for the purposes of a business”.

    The restriction of the DoV extension to privately owned vehicles was very deliberately designed to delimit the scope of cover and to exclude any commercial overlay.

  2. Nor was the use of the vehicle at the time of the accident “for social, domestic and pleasure purposes”, given that the accident occurred whilst the driver was commuting home from work. The primary purpose of the journey had not been altered by the detour to collect a friend on the way home.

The claimant insurer would, therefore, be wholly liable for the accident and its claim for a declaration dismissed.

What this means for you?

This decision underscores the importance of carefully scrutinising competing covers where double or dual insurance is alleged to exist.

Whilst identifying the essential or primary character of a journey will very much depend on the presentation of robust factual evidence – in order to establish whether a particular journey falls within (or outwith) a particular “use” class – arguments concerning the construction of a particular insurance policy are inherently less contingent on the availability of such evidence. As a result, coverage arguments are more inclined to offer a greater degree of predictability.

In the instant case, the High Court had no hesitation in holding that “It is clear in my judgement that the car in question cannot be described as a "private motor car" within the [Elephant] policy… The notion of a "private" motor car… is plainly not a car which is operated or supplied in the course of or for the purposes of a business…”

That was sufficient to dispose of the claimant’s claim, however, confirmation that the essential character of the commute was not fundamentally altered by an incidental detour for social purposes offers welcomed clarity for insurers deploying “use” arguments on all sides.

Whilst vital to always inspect each policy considered to cover a particular risk, this judgment does suggest that vehicles supplied by businesses in the course of an insured enterprise are likely – but not certain – to be covered only by that business’s own fleet policy. Those writing covers for the motor trade or the private motor insurance market would be well advised review policy documents to ensure that the scope of cover has been sufficiently delimited and that exclusions operate as intended.

 

Written by Kerris Dale, Verinder Bedi and Andrew Guirguis at BLM

verinder.bedi@blmlaw.com

andrew.guirguis@blmlaw.com

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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Kerris Dale

Kerris Dale

Partner, head of office and head of motor,
Cardiff


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