Supreme Court: Motor Insurer Not Liable For Fire Damage Caused By Policyholder Repairing Vehicle

The Supreme Court has held that vehicle repairs on private property are not considered 'use' of the vehicle for the purposes of the Road Traffic Act. Therefore, any third party property damage caused by negligent repairs in these circumstances will not be covered by the motor insurance policy.

Background

Mr Holden owned a vehicle insured by UK Insurance Limited ("UKI").

Clause 1a of the UKI policy stated that "We will cover you for your legal responsibility if you have an accident in your vehicle and you kill or injure someone [or] you damage their property".

The policy was required to satisfy the relevant legislation, including S145(3) of the Road Traffic Act ("RTA"). The RTA states that policies must provide cover "in respect of any liability incurred... in respect of... damage to property caused by, or arising out of, the use of the vehicle on the road or other public place."

Mr Holden was employed as a mechanical fitter employed by the appellants trading as Phoenix Engineering ("Phoenix"). He asked Phoenix if he could carry out repair work on his vehicle needed to pass its MOT. As part of the repair works, he had to move the vehicle inside Phoenix's premises and then start to use welding tools.

Whilst welding, Mr Holden answered a phone call, then saw flames inside the car. It was found that sparks from the welding had ignited flammable material inside the car. The fire spread to other flammable materials outside of the vehicle, taking hold and causing substantial damage to Phoenix's and adjoining premises.

Phoenix was insured by AXA against property damage and public liability. AXA paid in excess of £2 million to repair and reinstate the damage caused. They pursued a subrogated action in Phoenix's name against Mr Holden.

UKI sought a declaration that they were not liable to indemnify Mr Holden for the claim. AXA / Phoenix counterclaimed for such an indemnity.

Court of Appeal

The High Court granted the declaration sought by UKI. Phoenix appealed.

The Court of Appeal held that Clause 1a of the policy was inadequate and did not satisfy the requirements of the RTA. They construed Clause 1a to mean "We will cover you for your legal responsibility if there is an accident involving your vehicle," thus covering repairs which were commonplace for drivers.

The Master of the Rolls also held that the repairs amounted to 'use' under s145(3), as this was consistent with the recent ECJ jurisprudence and the objective of the Motor Insurance Directive.

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