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No cover for drivers deliberate act

EUI LTD v BRISTOL ALLIANCE LTD PARTNERSHIP (2012)

[2012] EWCA Civ 1267

CA (Civ Div) (Ward LJ, McFarlane LJ, Dame Janet Smith) 11 October 2012

INSURANCE - ROAD TRAFFIC

DAMAGE TO PROPERTY : EXCLUSION OF LIABILITY : MOTOR INSURANCE : MOTOR INSURERS' BUREAU : PROPERTY INSURANCE : ROAD TRAFFIC ACCIDENTS : SUBROGATION : PROPERTY DAMAGE CAUSED DELIBERATELY BY DRIVER : MOTOR INSURANCE POLICY EXCLUDING DAMAGE DELIBERATELY CAUSED : WHETHER MOTOR INSURER OBLIGED TO SATISFY JUDGMENT OBTAINED BY PROPERTY INSURER AGAINST DRIVER : ROAD TRAFFIC ACT 1988 s.145, s.151, s.151(2)(a), s.145(4)(b), s.145(4)(d)

A property Insurer was not entitled to recover from a motor Insurer in respect of property damage deliberately caused by a driver where the motor insurance expressly excluded damage caused by the driver's deliberate act. The policy exclusion meant that the judgment obtained by the property Insurer against the driver did not relate to a "liability covered by the terms of the policy" within the Road Traffic Act 1988 s.151(2)(a).

The appellant Motor Insurer (E) appealed against a decision ([2011] EWHC 1657 (QB), [2011] 2 All E.R. (Comm) 1113) that the Insurer of the respondent property owner (B) was entitled to recover from E in respect of property damage deliberately caused by a driver (W). W deliberately crashed his car into a shop owned by B causing substantial damage. B's property Insurer brought a subrogated claim against W and obtained judgment against him. W had motor insurance but his policy issued by E excluded damage caused by his deliberate act. B's Insurer contended that on the proper construction of the policy, the Road Traffic Act 1988 s.145 and s.151, and the European Directives on motor insurance, E had to cover damage to property whether deliberately caused or not. E contended that because the policy expressly excluded damage deliberately caused it was not obliged to indemnify the property owner on the correct interpretation of s.151. The judge decided as a preliminary issue that B's Insurer was entitled to recover from E. E submitted that because the policy excluded liability for deliberate acts, the judgment did not relate to a liability "covered by the terms of the policy" within s.151(2)(a) so as to impose a duty on it to satisfy the judgment.

HELD: Under the 1988 Act not all damage to property had to be covered. Under s.145(4)(b) the policy was not required to provide for insurance of more than 1 million in respect of damage to property arising out of any one accident, and under s.145(4)(d) it was not required to cover liability in respect of damage to goods carried for hire or reward in the vehicle. The list was not exclusive and other forms of liability could be excluded by agreement between Insurer and Insured. There were time-honoured limitations on use for social, domestic or pleasure purposes and the validity of such limitations had never been doubted. If there was such a limitation then use for hire or business would be uninsured.

Liability for the damage caused by W to the shop was not "covered by the terms of the policy" within s.151(2)(a) because the terms of the policy expressly excluded damage caused by the deliberate act of the driver. It could not be right that the only requirement of s.151 was that the liability was of the kind which ought to have been covered by a policy complying with s.145 even if the actual policy did not cover that particular liability. The scheme of the Act coupled with the Motor Insurers' Bureau arrangements satisfied the aim and spirit of the European motor insurance directives to enable third party victims of accidents caused by vehicles to be compensated for all damage to property and personal injuries sustained by them, Criminal Proceedings against Bernaldez (C-129/94) [1996] All E.R. (EC) 741 considered. There was no justification for reading Bernaldez in such a way as to preclude E relying on the exclusion clause.

The exclusion of liability meant that W was uninsured, but the directives allowed for such uninsured losses to be paid under the Motor Insurers' Bureau scheme even if that was a measure of last resort. Section 151 gave no right of recovery against E with the result that ordinarily a claim would be made against the Motor Insurers' Bureau. However, the Motor Insurers' Bureau scheme did not extended to compensating those who suffered property damage where such damage was insured by the victim's own Insurer which brought a subrogated claim for recovery (see paras 34, 40, 42, 46-48, 63-64, 66 of judgment). Appeal allowed

END