The UK’s Supreme Court has overturned an earlier Court of Appeal decision which would have set a precedent with costly consequences for motor insurers.
The case involved fire damage caused when a fitter undertook welding work on his car in a workshop. The insurance losses to the garage and neighbouring premises were in excess of £2 million.
The Court of Appeal on the 12th April 2017 decided that the welding work amounted to an insured “use” of the vehicle based on the motor policy wording in place (UK Insurance v Holden & Phoenix). This would have meant that the losses could be recovered against the motor insurance policy covering the vehicle, increasing the range of potential losses covered by such policies in the future unless the wording was adjusted.
However, the Supreme Court unanimously overturned The Court of Appeal finding on the 27th March 2019 (R &S Pilling (t/a Phoenix Engineering v UK Insurance Ltd). According to the decision, vehicle repairs on private property could not constitute “use” for compulsory motor insurance purposes and “use” required that the user has an element of control, management or operation of the vehicle (as a means of transport) while it is on the road or other public place.
“The Supreme Court decision is a sensible one and will be welcomed by motor insurers and aligns with compulsory motor insurance operation under the RTA (Road Traffic Act) 1988,” says Tom Maughan, Claims Executive/Vice President at Lockton.
Furthermore, the Supreme Court held that EU law did not require it to “disapply” domestic law i.e. RTA 1988 which would require an express amendment for “use” to extend beyond the RTA cover for use of a vehicle on a “road or other public place”.
“The Supreme Court confirmed that the RTA does not comply with the European Motor Insurance Directive (2009) and that it cannot be interpreted so as to apply beyond roads and other public places” Maughan says.
“It remains to be seen as to whether legislation will be expressly amended to widen the scope of compulsory motor insurance to comply with the European Motor Insurance Directive,” he adds.
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Claims Executive | Vice President
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