Update: road traffic

Is a motor insurer liable to meet a claim for damage to property caused by the deliberate act of its insured driver? This question was answered in the affirmative in Bristol Alliance v Williams [2011] EWHC 1657 (QB). On a preliminary issue it was assumed that the insured motorist had deliberately driven his car into the House of Fraser store in Bristol, possibly in an attempt to commit suicide, causing damage in excess of £200,000. Whereas it is a basic rule of insurance law that an assured is not covered by a contract of insurance in respect of loss caused by his own intentional act, motorists must be insured in respect of their use of a motor vehicle on a road or other public place otherwise they would commit a criminal offence contrary to section 143 of the Road Traffic Act 1988. Policies of motor insurance must cover such use of a motor vehicle and section 151 of the Road Traffic Act 1988 obliges insurers to meet judgments obtained against insured motorists in respect of the use of the vehicle on a road or other public place even if under the terms of the policy the driver would not be covered by the insurance. The policy underlying the Act is to ensure that third parties who suffer injury, loss or damage arising out of the use of a motor vehicle recover damages notwithstanding any right of the insurer under the contract of insurance to avoid meeting the liability. In this context use of the motor vehicle covers not only injury, loss and damage by negligence but also that caused deliberately and so the provisions of the 1988 Act effectively override the principle that an insurer is not liable for the deliberate actions of the insured. Thus the motor insurer was obliged to meet a subrogated claim brought by the shop's property insurers against the motorist.

Evidence of insurance

The Road Traffic Act 1988 was amended in 2005, with a new section 165A creating a power to allow police constables to seize motor vehicles being driven without a licence or insurance. The proper exercise of that power was considered by the Court of Appeal in Pryor v Chief Constable of Manchester Police [2011] EWCA Civ 749.

Mr Pryor, the owner of a Honda motorcar, had given written permission to his friend, Mr Burton, to drive the Honda. Mr Burton already had a motor policy with Saga Insurance which extended third party liability insurance to allow him, as policyholder, to drive, with the consent of the owner, a motor vehicle not belonging to him. While driving the Honda Mr Burton was stopped by two constables to whom he duly presented the owner's authorisation to drive and the insurance certificate from Saga.

Having made telephone enquiries of Saga, the police constables seized the Honda because there was no evidence that there was a policy of insurance relating specifically to the Honda. Mr Pryor sued the police for wrongful interference with his goods. For the police to exercise the power properly three conditions had to be satisfied: the constable must have required evidence of insurance to be produced; the driver must have failed to produce the 'relevant certificate'; and the constable must have had reasonable grounds for believing that the vehicle was not insured. The case turned on what constituted the relevant certificate.

Finding the police liable, Ward LJ answered the question thus: 'I ask rhetorically: what other certificate of insurance could he produce other than the certificate issued by his insurers which did cover this use of that vehicle? The Saga certificate shows that he was not guilty of an offence under section 143. It showed clearly on its face that he was covered provided he was driving with Mr Pryor's consent and that consent was demonstrated by the testimonial written by Mr Pryor'¦ The purpose of section 165A is to give the police the power to remove from the road vehicles which are being used without third party insurance being in place to cover that use. Here that cover was in place.'

Cost of repairs

The high cost of motor insurance has been the subject of much public debate and the practice of one insurer, Royal & Sun Alliance Group (RSA), has attracted adverse judicial comment recently. In Fallows v Harkers Transport (a firm) (Romford County Court, unreported, judgment 2 September 2011) His Honour Judge Platt was forthright in his criticism of RSA.

This was one of many cases involving RSA's practice of organising the repair of vehicles through an intermediary and claiming the cost charged by the intermediary, which is apparently higher than the sum claimed by the actual vehicle repairer. The case arose out of a simple road traffic collision, which caused damage to the Claimant's vehicle, which was comprehensively insured by RSA.

The repair of the vehicle was organised by RSA Accident Repairs Ltd. (RSAARL) a wholly owned subsidiary of RSA. In fact the actual repair was carried out by a contractor. The actual cost of the repair invoiced by the contractor was £1,542.78 but the invoice raised between RSAARL and RSA was £1,825.32, this being the sum claimed by the claimant against the defendant. The discrepancy between the two invoices was caused by: a higher hourly rate appearing on the RSAARL invoice than that charged by the contractors; a claim for 'sundry allowance' which did not appear at all on the contractors' invoice and a charge for the collection and recovery of the vehicle.

The judge was clearly concerned not only in relation to the case before him but as to the cost that RSA's practice would have upon other motor insurers. If other motor insurers adopted the same practice then based on the sums claimed in Fallows it could lead to an increase of 25 per cent in the cost of minor, motor repair cases.

Judge Platt introduced his judgment thus: 'Behind this simple story lies a giant struggle which has been going on for many months between RSA on the one hand and a number of defendant insurers over a method of business which is seen on the part of RSA as perfectly legitimate and by a number of defendant insurers as involving methods of business which fall somewhere between very sharp practise [sic] and outright fraud. While the sums in each case are very modest it is clear that across the industry millions of pounds are a stake.'

The judge found that only the lower sum of £1,542.78 was recoverable. His general observations were that in using an intermediary RSA, who were bringing a subrogated claim, had failed to act reasonably in mitigation of the loss. It was trite law that the subrogated claimant cannot put himself in a better position that the original claimant.

The judge dismissed the claim for the 'sundry allowance' on the grounds that it had not been proved to have been incurred by RSAARL. He described the contention that this item of loss was 'simply a fiction invented by RSAARL' as 'wholly compelling'.

In respect of the delivery and collection charge he found that this was a loss which could have been avoided by the taking of reasonable action (driving the vehicle to the repairer) and so the claimant had failed to prove that the loss was caused by the defendant's negligence and rather than the commercial decision to employ RSAARL as an intermediary.

Judge Platt was particularly critical of RSA's approach to disclosure of documents. He noted that the scheme would only be profitable to RSA so long as the insurer could conceal it from other insurers.

'This would seem to explain the quite extraordinary lengths to which RSA through it solicitors and RSAARL have been prepared to go in order to conceal the true position vis à vis RSAARL and its subcontractors in answer to proper requests for disclosure from defendant insurers', the judge observed. He rejected the argument that RSA were not obliged to disclose documents other that the invoice between RSAARL and RSA; once the issue of mitigation was a live issue then the documents from the contractor, who carried out the work, were relevant.

Neither could RSA resist disclosure on the grounds that the documents were in the control of RSAARL '“ 'the duty of disclosure is not to be avoided simply by the device of interposing an intermediary company into the equation'

Judge Platt gave the claimant permission to appeal but it is not clear if an appeal will be forthcoming. RSA rejects the assertion that it has behaved inappropriately and insists that its model is legal. A test case is apparently pending in the High Court.