Supreme Court has ruled against Axa in a landmark dispute between a property damage insurer and a motor insurer over £2m fire claim.
BLM partner and head of motor Kerris Dale spoke to POST about the ruling for R&S Pilling (trading as Phoenix Engineering) v UK Insurance and the clarity the decision provides insurers regarding the circumstances in which a liability may properly be described as having arisen out of the “use” of a vehicle.
The case relates to an accident that took place in 2010 when a mechanical fitter accidentally set fire to his car while repairing it at the premises of his employer, Phoenix Engineering. The fire caused £2m of damage to Phoenix and its neighbour’s premises. Phoenix’s insurer, Axa, paid out and brought a subrogated claim by pursuing Mr Holden’s car insurance provider, Churchill, for the money.
In February 2016, Judge Waksman QC ruled in favour of Churchill saying that “the accident has not arisen out of the use of the car”. The decision was overturned by the Court of Appeal, following Phoenix’s argument that the wording of a clause in the policy was inadequate. As a result, the clause was extended to cover repairs which were “commonplace for drivers”. The court accordingly construed the opening words of clause 1a to mean: “We will cover you for your legal responsibility if there is an accident involving your vehicle”.
Speaking to POST's Pamela Kokoszka, Kerris said: “The judgment is good news for motor insurers. Where a motor policy requires judicial interpretation to ensure it complies with the statutory requirements of the Road Traffic Act, the only additional wording that may be read into the policy’s insuring clause, is that which is needed to make the cover comply with the RTA. This means that motor insurers will not be penalised for using plain language, for the benefit of its customers, in place of legal jargon.
“Notwithstanding a raft of European judgments – Vnuk and Torreiro – that demonstrate a need for parliament to amend our domestic road traffic legislation, it remains the domestic cover required by the RTA (rather than the extended scope of motor insurance which the European regime advocates to accord with the motor insurance directives) that must be read into UK motor policies.
“Finally, the Supreme Court’s judgment clarifies, for the benefit of all insurers, where liability for these losses generally lies. The courts are not prepared to find that a liability arises from the ‘use’ of a vehicle merely because one features in a claim. Instead, it underscores the need for a causal link between the use of the vehicle and the damage resulting from that use. Here, the property damage was not caused by, nor did it arise from, the use of a vehicle on a road or other public place – the compulsory insurance requirement within Part VI of the RTA – but by an allegedly negligent repair.”
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