The Court of Appeal, Civil Division, in allowing the appellant’s appeal, held that a motor insurance policy had extended to liability for damage to the property of third parties as a result of fire caused by repair work the policyholder had been carrying out to the car at a time when it was immobilised.
UK Insurance Ltd v R&S Pilling trading as Phoenix Engineering  EWCA Civ 259
In June 2010, a mechanical fitter, H, employed by the appellant, Phoenix, received permission from his employer to use the loading bay at its premises to do some work on his car, which would hopefully enable it to pass its MOT. Whilst welding plates onto the underside of the car to deal with corrosion, sparks from the welding ignited flammable material inside the car, including the seat covers. The fire spread and set alight some rubber mats lying close to the car. The fire then took hold in Phoenix’s premises and the adjoining premises and substantial damage was caused. Phoenix’s insurer, AXA, paid out to Phoenix and the owner of the adjoining property in excess of £2million. Being subrogated to Phoenix’s rights, AXA made a claim against H in the name of Phoenix for an indemnity in respect of the sums it had paid out. If H had any insurance in respect of that claim, it was only by reason of his Churchill motor insurance (the policy). The respondent, UKI, which provided motor insurance under the Churchill brand and would be responsible for any liability under the policy, commenced proceedings for a declaration that it was not liable to indemnify H in respect of any liability he might have arising out of his welding activities to his car in June 2010. Phoenix counterclaimed for a declaration that UKI was liable by the terms of the policy to indemnify H in respect of the loss and damage suffered by himself and/or neighbouring occupiers arising out of the fire started by H in his vehicle whilst he attempted to undertake repairs to it in June 2010. Phoenix made an undertaking only to recover such sum, if any, as could be recovered from UKI, thus, not putting H personally at risk. The judge concluded that the policy did not respond to the particular claim and UKI was entitled to the declaration sought. Accordingly, he dismissed Phoenix’s counterclaim. Phoenix appealed against the judge’s order.
The issue for determination was whether H’s policy extended to liability for damage to the property of third parties as a result of fire caused by repair work he was carrying out to his car at a time when it was immobilised. Consideration was given to clause 1a of the policy, which stated: ‘We will cover you for your legal responsibility if you have an accident in your vehicle and: you kill or injure someone; you damage their property; or you damage their vehicle’ (clause 1a). Consideration was also given to the certificate of the policy (the certificate), which stated: ‘I hereby certify that the policy to which this Certificate relates satisfies the requirements of the relevant law applicable in Great Britain…’ Further consideration was given to section 145(3) of the Road Traffic Act 1988.
The appeal would be allowed.
It was obvious that something had gone wrong with the language of clause 1a in that its express terms only covered liability if H had been in his car when the accident had occurred. Such limitation of cover had, plainly, never been intended. That error was best addressed by treating the relevant wording as if it had said: ‘if there is an accident involving your vehicle’. The policy stated expressly that the certificate formed part of the policy and so the two documents had to be read together. The certification that the policy ‘satisfies the requirements of the relevant law applicable in Great Britain’ meant that the cover provided by the policy was to be read as extending to all the matters in section 145(3) of the Act. That did not mean a narrowing of the cover provided by the express terms of the policy, but an extension of cover insofar as the express terms did not embrace the matters specified in section 145(3). That conclusion was reinforced by the fact that in at least two specific respects (namely, geographical limitation and the amount of policy cover) the express terms of the policy gave more extensive cover than that required by section 145(3). On the other hand, section 145(3) required insurance in at least one respect more extensive than the express provisions of the policy. In particular, the cover under clause 1a was limited to an accident, that was to say, something fortuitous or unexpected. However, section 145(3) required insurance against the deliberate causing of death, bodily injury or damage to property. The effect of the certification in the certificate was to extend the cover to such an occurrence by necessary implication. If the cover under clause 1a was interpreted in that way, namely as being extended but not limited by section 145(3), and removed the express condition that H be in the car at the time of the accident, the cover extended to the loss and damage caused by the accident which had occurred in June 2010 (see -, , , , ,  of the judgment).
Per curiam: ‘I accept that, on the proper interpretation of clause 1a…, there may be limits to the indemnity for the consequences of an accident arising out of work to the car. Where, for example, the car has not been driven for a considerable period of time, or the work is of reconstruction rather than repair, or the work to the car is not for the purpose of its use as a car in the immediate or near future, arguments may arise on the proper meaning and effect of clause 1a. Those are not, however, this case, where the circumstances in which the repairs are necessary and the purpose for which they are effected are entirely commonplace for drivers generally’ (per Sir Terence Etherton MR, see  of the judgment).
Michael Davie QC (instructed by DAC Beachcroft LLP) for the appellant.
Graham Eklund QC (instructed by Keoghs LLP) for the respondent.
Manveer Cheema Barrister.