R&S Pilling (t/a Phoenix Engineering) v UK Insurance Ltd
Citations:  UKSC 16;  2 WLR 1015;  3 All ER 917;  2 All ER (Comm) 793;  RTR 28;  Lloyd’s Rep IR 404;  CLY 1578.
A motorist’s car failed an MOT test. He drove it to a garage, where he attempted to repair it himself. During the course of repairs, the car caught fire. The fire spread to and damaged the garage and the neighbouring premises. The garage’s insurer paid out sums to the owners of the neighbouring premises. They then sought an indemnity from the motorist. The motorist turned to their own insurer to pay the garage’s insurer.
The motorist’s insurer refused to pay the indemnity. The motorist’s policy stated that the insurer would cover him if he had ‘an accident in [his] vehicle and … damage[d] [someone’s] property.’ They argued that the motorist had not ‘had an accident in his vehicle’, so the clause did not require them to cover him.
Section 145(3)(a) of the Road Traffic Act 1988 requires insurers to insure motorists in respect of any liability they might incur in relation to property damage ’caused by, or arising out of, the use of the vehicle on a road or other public place’.
This provision implements European Union law – particularly article 3 of Council Directive 2009/103/EC. European Court of Justice jurisprudence holds that this compulsory insurance must cover use on public and private land.
The garage’s insurer argued that repairing the vehicle was ‘use’ of the vehicle. This would put the policy in conflict with the statute. The motorist’s insurer argued that repairs were not use. In any case, they pointed out that the repairs took place on private land – not a road or public place.
- Was the motorist’s insurance policy compliant with s.145(3) of the Road Traffic Act 1988?
- What was the legal effect of any lack of compliance?
- Given that EU law requires compulsory motor insurance to apply to private and public land, but the Road Traffic Act 1988 only refers to public land, did it matter that the car was repaired on private land?
- Were repairs ‘use of the vehicle’?
The Supreme Court held:
- While European Union law jurisprudence held that the compulsory insurance obligation in article 3 of Parliament and Council Directive 2009/103/EC must cover the use of vehicles on private land, s.145(3)(a) of the Road Traffic Act 1988 could not be read in a manner compliant with that jurisprudence. Doing so would involve policy implications the court was not competent to deal with. It would impose retrospective criminal liability on insurers.
- It was also not appropriate to disapply s.145(3) just because it could not be read in a compliant fashion. The more appropriate remedy was an action for damages against the State for incorrect implementation.
- Accordingly, the compulsory insurance obligation in English law only requires insurers to cover property damage arising from the use of a vehicle on a road or in a public place.
- To the extent the policy conflicted with s.145(3), it had to be interpreted in a compliant manner. Here, this required the court to substitute the words ‘there is an accident involving your vehicle’ in place of the phrase ‘you have an accident in your vehicle’.
- The garage was private property. Repairing the vehicle did not constitute ‘use’ of the vehicle within the meaning of the statute or the insurance policy. The damage therefore did not fall within the policy.
The Supreme Court granted the motorist’s insurer a declaration that they were not liable to pay.
This Case is Authority For…
If a motor insurance policy is not compliant with s.145(3) of the Road Traffic Act 1988, it must be interpreted in a manner which makes it compliant. A contract cannot cut back on the protections provided by the Act.
The correct interpretation of ‘use of a vehicle’ under s.145(3) is as follows:
‘The relevant use occurs where a person uses or has the use of a vehicle on a road or public place, including where he or she parks an immobilised vehicle in such a place (as the English case law requires), and the relevant damage has to have arisen out of that use.’
It is not enough that the accident would not have occurred ‘but for’ the car being on the road or a public place. For example, in this case, the fire would not have happened if the car had not been driven on a road to get to the garage. This was not a direct enough link to justify the conclusion that the accident arose out of use of the vehicle on the road.
The decision to interpret the contract by reading words in was based on the reasoning in Chartbrook Ltd v Persimmon Homes Ltd  AC 1101. That case decided that where the contract’s background indicates that something has gone wrong with the contractual language, the court does not have to attribute to the parties the intention which a reasonable person would understand them to have.
In only rare cases will this approach be justified, however. The conflict between the statute and the contract, in circumstances where the insurer might incur criminal sanction if the contract did not comply, clearly indicated that something had gone wrong in this case. As such, the court was entitled to depart from the meaning which a reasonable person would take from the language of the contract. The Supreme Court noted that this process was interpretation – distinct from rectification.