In interesting interpretation reviewed by Michael Flaherty, Senior Solicitor at Churchers.
A stationary car that was being repaired by its owner on private property caught fire and the fire spread, causing extensive damage to the property of a third party, this was not an accident that arose out of the “use” of the car. The courts therefore found that this was not an accident that was covered by the owner’s motor insurance policy and nor did it come within the statutory requirement for compulsory third-party insurance.
Mr Holden was a mechanical fitter employed by Phoenix, the owner of commercial premises. His car failed its MOT and he asked Phoenix if he could use its loading bay to carry out work on his car in the hope that it would pass its MOT. Phoenix agreed.
While he was carrying out welding work on his car, sparks ignited flammable material inside the car. The fire spread to Phoenix’s premises and to the adjoining premises, causing substantial damage. Phoenix’s insurer paid out more than £2 million to Phoenix and the owners of the adjoining premises. Phoenix’s insurer then made a claim in Phoenix’s name against Mr Holden’s motor insurer, UK Insurance Ltd (UKI) UKI responded by bringing a legal action seeking a declaration that it was not liable to indemnify Mr Holden against the claim.
Mr Holden was named in the action, but had taken no part in the proceedings because he was not at risk: Phoenix’s insurer had undertaken to limit its recovery to such sum, if any, as it could obtain from UKI. The real dispute, therefore, was between the two insurance companies.
UKI said that the policy did not respond to third-party claims involving the car while it was being repaired on private premises such as Phoenix’s garage. Phoenix contended that the policy covered accidents involving the car off-road and that in any event the repair of the car could properly be described either as the use of it, or as arising out of its use, on a road or other public place.
Because Mr Holden was not in his car when the accident occurred, as an express term of his insurance policy required, and because the 1988 Road Traffic Act did not require third-party insurance cover in the circumstances of the present accident, the court ruled that UKI was entitled to the declaration it sought. It was not liable to indemnify Mr Holden.
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