Compulsory insurance against third party risks – Liabilities required to be covered
Bristol Alliance Limited Partnership v EUI Ltd: Court of Appeal, Civil Division: 11 October 2012
W, who suffered from serious depression, was driving his car at very high speeds when he deliberately drove into a wall, spun in the air, bounced off the roof of another car and smashed into the plate glass windows of a department store. The damage caused was in excess of £200,000. W was convicted of dangerous driving and causing criminal damage. The store formed part of a large shopping centre development in the centre of Bristol which was owned by the claimant. The damage was covered by its property insurance policy.
A claim was brought against W by the property insurer by subrogation in the name of the claimant. W had motor insurance but his policy did not cover damage arising out of his deliberate acts. It was common ground that the damage had been caused by a deliberate act. Therefore, W had no contractual right to indemnity against his motor insurer. There was an exception in the Motor Insurers’ Bureau for Compensation of Victims of Uninsured Drivers scheme agreement (MIB agreement) which meant that the scheme did not extend to compensating those who suffered property damage where such damage was insured by the victim’s own insurer who brought a subrogated claim for recovery. The property insurer commenced proceedings, contending that upon a proper construction of the policy, the Road Traffic Act 1988, in particular ss 145 and 151, and the European Directives on Motor Insurance, the motor insurers had to cover damage to property whether deliberately caused or not.
The defendant motor insurer submitted that because the policy expressly excluded damage deliberately caused with the result that the damage was not covered by the motor insurance policy, then upon the proper construction of s 151 of the Act, it was not obliged to indemnify the claimant. A trial of the following preliminary issue took place: ‘Is the claimant entitled to recover from [the motor insurer] even if [the motor insurer] is right in contending that: (a) the damage to the claimant’s premises was the result of a deliberate act by [W]; and (b) the insurance obtained by [W] from [the motor insurer] was set out in paragraphs 8-10 of [the motor insurer’s] defence [namely, that the insurance policy excluded ‘any … damage … arising as a result of …deliberate act caused by you …].’ The judge answered that preliminary question in the affirmative. The motor insurer appealed.
The motor insurer submitted that liability for damage in the instant proceedings was not covered by the terms of the policy because the terms of the policy expressly excluded any damage caused by the deliberate act of the driver. Consideration was given to the six Motor Insurance Directives, the last of which was Council Directive (EC) 2009/103 (on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles).The appeal would be allowed.
Section 151(1) of the Act applied where, after a certificate of insurance had been delivered to the person by whom a policy had been effected, judgment was obtained. The judgment was defined in s 151(2) as being a judgment relating to a liability with respect to any matter where liability with respect to that matter was required to be covered by a policy of insurance under s 145. Under s 151(20(a), the liability had to be 'covered by the terms of the policy to which the certificates relates'. Therefore, the policy was the policy to which the certificate of insurance related. A certificate of insurance that related to that policy had to be delivered. Liability had to be covered by the terms of that policy (see  of the judgment).
The claimant was not entitled to recover from the motor insurers. Properly construed as a matter of domestic law, s 151 of the Act was not satisfied in the instant case. W's liability, being deliberate damage, was not covered by the terms of his policy and s 151(2)(a) was not satisfied. Therefore, W's use of the vehicle was uninsured. Section 151 of the Act gave the claimant no right of recovery directly against the motor insurer with the result that the claimant would ordinarily seek its recourse under the provisions of the MIB agreement. Had the claimant not made a claim under its property insurance policy and there had been no question of subrogation, the motor insurer would have had to satisfy the liability under the MIB scheme and there would have been no question of not complying with the Motor Insurance Directives. It was only because of the subrogation that that liability could be denied under the terms of the MIB agreement (see , - of the judgment).Decision of Tugendhat J  2 All ER (Comm) 1113 Reversed.
John Ross QC and Laura Johnson (instructed by Reynolds Porter Chamberlain LLP) for the claimant; Howard Palmer QC and Marie Louise Kinsler (instructed by Cordner Lewis, Cardiff) for the defendant.