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Is your Policy as it should be?

Is your Policy as it should be?
November 1, 2018 Emily Parry

On 13 December 2018, the Supreme Court will hear the case of UK Insurance Limited –v- R&S Pilling T/A Phoenix Engineering [2017] EWCA Civ 259. The Supreme Court will consider the question of whether the act of repairing a vehicle which, as a direct result, caused fire damage to property belonging to a third party, falls within the interpretation of the terms given in the vehicle’s insurance policy (the “Policy”), the effect of section 145 of the Road Traffic Act 1988 (the “RTA”) (the requirement for third party insurance cover), and Directive 2009/103/EC of the European Parliament (the “Directive”) (relating to insurance against civil liability in respect of the use of motor vehicles).

The case mainly circles around the word “use”. The Policy provides that it “satisfies the requirements of the relevant law…” being the RTA. Section 145(3)(a) RTA provides that an insurance policy must insure against “damage to property caused by, or arising out of, the use of the vehicle on a road or other public place…[emphasis added]”.

Although on first hearing, the Judge held repair work to the vehicle, in this instance, did not fall within the definition of “use”, an appeal was allowed. In the Court of Appeal, it was later held that respectfully, the previous interpretation of the Policy, and the word “use” was incorrect, and the damage caused by the repairs was covered under the Policy. This meant that the insurance provider would have to pay for any damages.

This case has been appealed again, so the outcome is uncertain. However, this case is one of a few in recent months where there have been issue with single words in a contract or Policy. For example, in Navigators Insurance Co Ltd -v- Atlasnavios-Navegacao Lda (formerly Bnavios-Navegacao Lda) [2018] UKSC 26, it was considered whether an unknown third party smuggling drugs on a vessel acted “maliciously” under a company’s war risk insurance policy.

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