IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN’S BENCH
DIVISION (BELL, J.)
Royal Courts of Justice
Strand, London, WC2A 2LL
Tuesday 12 December 2000
LORD JUSTICE MANCE
and
MRS. JUSTICE SMITH
——————-
| SIMON PETER DODSON | Appellant/
Claimant |
|
| – and – | ||
| PETER H. DODSON INSURANCE SERVICES (A FIRM) | Respondents/
Defendants |
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
——————-
Benet Hytner QC & David Zucker (instructed by Messrs Mills Kemp & Brown for the Appellant)
Brian Doctor QC (instructed by Messrs Squire & Co. for the Respondent)
——————-
Crown Copyright ©
1. This is the judgment of the court. We have before us an appeal with leave of Bell J. from his order made 17th February 2000 declaring that, upon the true construction of a policy of motor insurance issued by the Eagle Star Insurance Company Limited to the claimant for the period 11th September 1992 to noon on 11th September 1993 and despite the sale of the claimant’s car on 17th April 1993, the claimant remained covered during the policy period in the event of his driving, subject to the owner’s permission, any motor car not belonging to or held under a hire purchase agreement by him. The claimant’s claim is for damages against the defendants, insurance brokers through whom he placed the policy, for negligence in (allegedly, since it is in issue whether they ever did) advising him that the insurance would remain in force in this situation. He was involved in a serious accident on 16th May 1993, whilst driving his mother’s car, as a result of which he incurred substantial liability to his passengers and third parties. The Eagle Star refused to indemnify him. Acting presumably with the advice of lawyers, he discontinued the proceedings initially pursued against them. Instead he has pursued the defendants, his brokers, by the present proceedings. The brokers’ response to the proceedings was to plead that the Eagle Star was after all liable, and to issue an application for summary judgment under Part 24. On that application, the judge assumed the accuracy of all the matters pleaded in the statement of claim, and made the order now under appeal.
2. For further details of the insurance position and the background, it is convenient to quote the judge’s judgment:
“The Claimant, Simon Dodson, is the son of Peter Dodson who is the principal of the defendant insurance brokers. The Claimant’s mother worked in the firm.
On or about 10 September 1992 the Claimant completed an Eagle Star Motorstar insurance proposal form in respect of his D registered Peugeot 309 motor car, instructing the Defendant to put into effect a valid policy of insurance which would enable him to drive, subject to the owner’s permission, any motor car not belonging to and not held under a hire purchase agreement by him. In particular he wanted to be sure that he would be insured to drive any of his parents’ motor cars.
The claimant paid the required annual premium and a policy and certificate of motor insurance were issued, valid until 10 September 1993.
The policy was entitled `’PRIVATE CAR POLICY”, beneath which appeared the following statement for and on behalf of the Eagle Star:
“The insured having
1 made to Eagle Star Insurance company Limited (the Company) a written proposal and declaration, and
2 paid or agreed to pay the premium as consideration, the Company will provide the insurance detailed in this Policy during the Period for which the Company may accept payment for renewal.”
The Period of Insurance stated in the Schedule was “from the 11th day of September 1992 to 1200 hours on the 11th day of September 1993.
Clause 1 of the policy was entitled “LIABILITY TO THIRD PARTIES”. It bore the marginal note “Indemnity to the Insured”. Paragraph 1 of the Clause read as follows:
1. The Company will indemnify the Insured in respect of legal liability for death of or bodily injury to any person and damage to property caused by or in connection with
(a) the Insured Vehicle
(b) the driving by the Insured (with the owner’s permission) of (c) any motor car or motor cycle neither owned nor held under a hire purchase agreement by the Insured
a trailer or disabled mechanically propelled vehicle attached to any vehicle described in (a) or (b) above.”
On 17 April 1993 the Claimant sold his Peugeot 309. He asked his mother and father whether his policy of insurance would continue to provide valid cover in the event of his driving, subject to the owner’s consent, any motor car not belonging to and held under a hire purchase agreement by him. He was advised by them that, despite the fact that he no longer owned a motor car of his own, the policy of insurance remained in force and was valid in respect of third party risks in the event of him driving a car belonging to someone else with that person’s consent.
Thereafter the Claimant from time to time drove his mother’s G registered Renault (a Renault 5 GT Turbo according to information in the trial bundle) with her consent. On 16th May 1993 while driving that car with her consent he was involved in a collision as a result of which a man was killed and two other person were injured.
The Eagle Star declined to indemnify the Claimant in respect of the claims for damages arising out of the accident, asserting that his policy had become void and was not in force once he had sold his own car and failed to obtain an immediate replacement. His mother’s insurance did not cover the Claimant driving her car but her insurers, accepted liability under the relevant provisions of the Road Traffic Act 1988 in respect of the third party claims.
In due course AGF took proceedings to recover their outlay from the Claimant personally. He initially claimed indemnity from the Eagle Star, in Third Party proceedings, but he discontinued those proceedings on legal advice. The Claimant now, in these proceedings, seeks from the Defendant an indemnity in respect of AGF’s claim against him, and in respect of other liabilities, on the basis that his liabilities have been caused by the Defendant’s allegedly wrong and negligent advice that if he sold his own motor car he would still be insured under the Eagle Star policy whilst driving other people’s cars with their consent.
The Defendant contends that its advice was right.
So the important issue arises whether on a true construction of the Eagle Star policy and despite the sale of his car on 17 April 1993 the Claimant was as at 16 May 1993 covered in the event of his driving, subject to the owner’s permission, any motor car not belonging to and not held under a hire purchase agreement by him. It has been ordered, in effect, and agreed that that issue should be decided first.
Being no longer a party to the action, the Eagle Star was not present or represented at the trial of the issue.”
3. The judge went on to set out certain material parts of the proposal and certificate of insurance:
“The Eagle Star proposal form completed by the Claimant bore the description “Private Car Proposal”. It asked for details in the following order: first, the proposer’s name and address, and whether “the vehicle” was kept at that address, and the driver’s occupation; next, the particulars of “the vehicle”, including the make and model, the type of body and seating capacity, the cylinder capacity, the estimated value, year of manufacture, date of purchase and registration mark, and whether it had been modified or altered from the manufacturer’s specification; then, whether the proposer was the sole owner and the registered keeper of the vehicle; then details of the proposer and any other person who might drive “the vehicle”, including date of birth, type of current UK driving licence held, and driving experience, and stating the name of the main driver of the vehicle and particulars of any motoring convictions, and of health; and then the type of cover required. Thereafter came a declaration of the truth of the proposal.
I have already referred to the Eagle Star’s statement of insurance, and to clause 1.1 of the policy. The policy provided under “Interpretation” that;
“The Certificate of Motor Insurance, the Schedule, the Appendices and any endorsements are incorporated in their policy…..”
The Certificate of Motor Insurance was in “FORM B”. Its first five paragraphs read as follows:
“1. DESCRIPTION OF VEHICLE.
Any Private Motor Car owned by or hired under a hire purchase agreement to the Policy holder.
2. NAME OF POLICY HOLDER
SIMON PETER DODSON
3. EFFECTIVE DATE of the commencement of Insurance for the purposes of the relevant law.
1200 hrs 10.9.1992.
4. DATE OF EXPIRY of Insurance
1200 hrs 10.9.1993.
5. PERSONS OF CLASSES OF PERSONS entitled to drive.
Provided that the person holds a licence to drive the vehicle or has held and is not disqualified from holding such a licence.
A. The Policyholder
B. The Policyholder is also entitled to drive, subject to the owner’s permission, any motor car (or motor cycle) not belonging to and
not held under a hire purchase agreement by the Policyholder………..”
Explanatory notes to the Certificate read as follows:
“REPLACEMENT AND ADDITIONAL VEHICLES
The Certificate covers the vehicle last notified to and accepted by the Company. It describes the vehicle by Registration Mark (Form A) or by description (Form B). If you wish to insure another vehicle you must notify the Company giving full particulars.
If the vehicle is additional to that already covered, another Certificate (and, in most cases, a new policy) will be required.
FORM A CERTIFICATES – YOU MUST OBTAIN A COVER NOTE (OR NEW CERTIFICATE) BEFORE THE REPLACEMENT OR ADDITIONAL VEHICLE IS USED.
FORM B CERTIFICATES – You must notify the Company WITHIN SEVEN DAYS of acquiring the new or replacement vehicle.
The company reserves the right to decline to insure any vehicle.”
This advice reflected paragraph 1 of Clause 11 (“CONDITIONS”) of the policy which bore the marginal note “Replacement Vehicles”, and provided:
“If the reference in the top left-hand corner of the Certificate of
Motor Insurance is
(a) Form A, no cover applies under this Policy for additional or
replacement vehicles until the Company has been notified of such addition or replacement and a Certificate of motor Insurance has been received by the insured
(b) Form B, the Company shall not be liable (except so far as is
necessary to comply with compulsory motor insurance legislation) to make any payment under this Policy in respect of any replacement or additional vehicle unless particulars of that vehicle are notified to the Company within seven days of the date of acquisition.”
Clause 11.5 of the policy which bore the marginal note “Vehicle Maintenance and Safekeeping”, provided:
“The insured shall maintain the Insured Vehicle in an efficient and roadworthy condition and take all reasonable steps to safeguard it from damage or loss, including theft/attempted theft/taking without consent and malicious damage/malicious fire.”
“Appendix 1 Extent of Cover” provided, under “B THIRD PARTY, FIRE AND THEFT”, that clause 2 of the policy, which provided that the Eagle Star would indemnify the insured against damage to or loss of “the Insured vehicle and its accessories….” was inoperative save for damage or loss by fire or theft or attempted theft.”
4. The judge then turned to authorities and textbooks to which counsel had referred him. The authorities were Rogerson v. Scottish Automobile and General Insurance Co. Ltd. (1931) 48 TLR 17 (HL); Tattersall v. Drysdale [1935] 2 KB 174; Boss v. Kingston [1962] 2 Ll.R. 431; and Wilkinson v. General Accident [1967] 2 Ll.R. 182. The textbooks included MacGillivray on Insurance Law (9th Ed.), paragraphs 20.1-4 and 29.15-18, and Hardy Ivamy on Motor Insurance, pages 243-6.
5. As against his brokers, the claimant now makes common cause with his insurers. His case is that his cover under clause 1(1)(b) of the policy depended (as Eagle Star had contended) upon his retaining his interest in either the insured car, or (in view of the Replacement/Additional Vehicles clause to which I will come) a substitute for it. Although the insurance covered third party, fire and theft, he submits that its essential “subject-matter” was the insured car or a replacement. This, he submits, is the tenor of both the authorities and the texts.
6. The defendants deny that one can deduce any general principle from the authorities. They submit that the issue is one of construction of a particular policy wording, differing from any covered by the cases.
7. The judge accepted the defendants’ case. He viewed clause 1(1)(b) as an independent head of insurance, capable of operating throughout the insurance period irrespective of whether or not the insured maintained his interest in the insured car or had replaced it under the insurance with another.
8. We start with the authorities. In Rogerson, the policy was a one year policy expiring 19th May 1929. The insured had exchanged the insured car shortly after effecting the insurance, and on 28th July 1928 was involved in an accident in his new car. In the policy, clause A covered, firstly,
“All sums which the assured shall become legally liable to pay [for damage] by any motor vehicle described in the schedule hereto (hereinafter called “the insured car”)
See the report in the Court of Appeal at (1930) 38 Ll.L.R. 142, 143. There was added to clause A the following:
“This insurance shall cover the legal liability as aforesaid of the assured in respect of the use by the assured of any motor car (other than a hired car), provided that such car is at the time of the accident being used instead of “the insured car””
9. The House of Lords recognised the principle that in case of doubt such a policy will fall to be construed against insurers. The speeches treat the case as turning on the proviso. In the view of the House that assume[d] “that there is “the insured car”, the use of which, if an accident arises, would entitle the assured to the benefit of the policy”. Lord Buckmaster went on:
“But if it be assumed that the original car be sold and another car taken in its place, the result would be, if the appellant’s contention were correct, that it might be possible to shift the insurance from car to car during the whole period of twelve months for which the policy runs, and that although there is no express limitation on the nature of the car that may be regarded as a substitute.”
10. In Tattersall Goddard J., who had been counsel for the successful insurers in Rogerson, preferred a broader view of that decision. The plaintiff’s insurance in Tattersall was initially in respect of his Morris Oxford but ultimately, after a number of changes of car and endorsements, in respect of a Standard car. It insured him in respect of the car and against third-party risks. But it contained a clause extending the third-party indemnity to the assured “whilst personally driving for private purposes any other private motor car …. not belonging to the assured in respect of which no indemnity is afforded by any insurance applying to such car”, provided that the car thereby insured should not be in use at the same time (see the report page 175). This wording therefore avoided the risk, identified by Lord Buckmaster, that an insured might shift the insurance from car to car purchased by the insured, without insurers’ knowledge or control. In August 1934, the plaintiff being minded to get another car, but not desiring immediate delivery and indeed not having decided finally what car he would have, agreed with dealers to surrender the Standard in return for an allowance of £180 against the price of any new car he cared to select and the use in the meantime of a car belonging to the dealers free of charge. In that car he had an accident on 9th September 1934. Goddard J. rejected the submission that the insurance applied, saying:
“The words of the extension clause in this policy are different from those used in Rogerson’s case, and Mr Croom-Johnson argues that the latter case really turned only on the construction place on the phrase “instead of the insured car,” which do not appear in the clause under consideration. But in my judgment that view is too narrow. I think that both in the Court of Appeal and the House of Lords the decisive factor was that the subject-matter of the insurance was the specified car, and that as the assured had parted with it he no longer was interested in the policy. The true view, in my judgment, is that the policy insures the assured in respect of the ownership and user of a particular car, the premium being calculated, as was found in Rogerson’s case, partly on value and partly on horse-power. It gives the assured by the extension clause a privilege or further protection while using another car which is always the subject of the insurance. Though the words differ in the two policies, the effect and intention seem to me to be the same, and express provision is made for what is to happen when the assured parts with the car. To construe this policy otherwise would be to hold in effect that two distinct insurances were granted, one in respect of the scheduled car, and another wholly irrespective of the ownership of any car. It may be that a person who does not own a motor car can get a policy which would insure him against third-party risks whenever he happens to be driving a car belonging to someone else; but the clause I am considering is expressly stated to be an extension clause, that is extending the benefits of this policy, and accordingly if the assured ceased to be interested in the subject-matter of the insurance the extension falls with the rest of the policy.”
11. After issuing a first draft of this judgment, there came to our attention a further decision of Goddard J., not referred to below or before us. That is Peters v General Accident & Life Assurance Corporation Ltd. (1937) 4 AER 628, where Goddard J. applied his reasoning in Tattersall to an “extension clause” reading:
“In terms of and subject to the limitations of and for the purposes of this section, the corporation will treat as though he were the policyholder any person who is driving such vehicle on the policyholder’s order or with his permission….”
Before us Mr Doctor QC for the defendants emphasised both Goddard J’s reference in Tattersall to the expressed nature of the clause there as an extension clause, and its proviso “that the car thereby insured should not be in use at the same time”, which, he points out, contemplated that the insured car continued available for use.
12. The third case, Boss v. Kingston, concerned a third-party risks only motor-cycle policy. Clause (1) indemnified the insured against third-party risks in connection with any motor-cycle described in the policy schedule. Motor-cycle A was there specified. Clause (2) read:
“(2) In terms of and subject to the limitations of and for the purposes of the policy the company will also indemnify the insured while driving a motor-cycle not belonging to him and not hired to him under a hire-purchase agreement as though such motor-cycle was a motor-cycle described in the schedule.”
Boss sold motor-cycle A, and two weeks later was found driving a motor-cycle owned by one Hansford, who was riding pillion and whose insurance did not cover Boss. The Divisional Court held that Boss was driving uninsured. Lord Parker CJ, giving the judgment of Gorman J. and himself, observed that the case was distinguishable from Rogerson and Tattersall, since it concerned a third-party only insurance, and accordingly there was no necessity for the insured to have any insurable interest in any vehicle. He said that the question turned on the proper construction of the policy. But he concluded for three reasons that it was “impossible to construe this policy as providing [by clauses (1) and (2)] two wholly independent indemnities”:
“In my judgment, it is impossible to construe this policy as providing two wholly independent indemnities, and for the following reason: (1) It seems to us, and indeed this was admitted, that the premium is fixed by reference to the named vehicle. (2) The natural interpretation of the second indemnity is to effect temporary cover whilst the named vehicle is out of use. Thus it only covers use of a vehicle not owned by or under hire-purchase to the assured. (3) Condition (5), which is a condition precedent to liability, not only cannot be complied with if possession of the named vehicle is wholly parted with but is really only apt in regard to a named vehicle. That being so, the only remaining question is whether in the circumstances of this case the policy has lapsed in regard to the named vehicle. I conceive that it might be possible for the vehicle to be parted with under circumstances in which rights of user are retained, in which case it could be said that the indemnity in respect of it remains in operation. Where, however, as here, possession of the vehicle is parted with and no rights of user are retained, the indemnity must I think lapse in regard to that vehicle. That being so, for the reasons given above, the whole policy will lapse.”
13. Salmon J. reached the same decision with reluctance and viewed condition (5) as critical:
“I must confess that but for condition (5) in the policy I should have come to a different conclusion. If it were not for this condition I should have been disposed to find that it would need express words in this third-party liability policy to make the sale of the vehicle named in the policy absolve the insurers from their liability to indemnify the assured whilst driving the other vehicles referred to in the policy. Condition (5), however imposes an obligation upon the assured to take all reasonable steps to maintain the vehicles in an efficient condition, and states that the company shall have at all times free access to examine such motor-cycle. The assured’s compliance with that obligation is a condition precedent to the insurer’s liability. Once the assured sells or parts with possession of the named vehicle without retaining power to comply with his obligation under condition (5) – and in this case there is no suggestion that he retained such power – it seems to me that he is in breach of condition (5), and it inescapably follows that the insurers are absolved from all legal liability.
I reach this conclusion with some reluctance, for the following reasons: first, it seems to me that this assured bona fide believed that he was covered. I am inclined to think that almost any other person to whom this policy was issued, except perhaps a trained lawyer, would have suffered under a similar delusion. Secondly, the insurers in this case testified that they would without question have paid if the assured had in these circumstances met with an accident or killed a third party. I am certain that any other reputable insurers would have adopted a similar attitude. Thus, the assured certainly had no criminal intent, and the mischief at which the Act is aimed was not achieved.”
14. The last paragraph finds no parallel in the majority judgment. The first consideration contrasts with Lord Parker’s second reason. We approach Salmon J’s second consideration with caution. All we have before us are textbooks and subsequent authority (see below) which do not seem to lend it support. We have no other evidence to throw light on the general understanding of the motor insurance market, which includes insurers, agents and brokers. Neither the evidence of the insurers in Boss nor Salmon J’s confident expression of certainty constitute evidence in this case. Part of the difficulty of the present case lies in the fact that the present insurers, Eagle Star, are not before the court, although we understand that they have been aware of these proceedings at all material times, and participated through their solicitors in discussions shortly before the appeal was heard. It would not be fair to conclude that they have adopted an attitude that no other reputable insurers would adopt. Indeed, the attitude that they adopted must, presumably, have been regarded by the claimant’s own legal advisers as correct.
15. In this connection it is also relevant to note the decision in Wilkinson. The insured there was insured in respect of both damage to the insured car and third-party liability. He exchanged his car several times and on each occasion effected a substitution of the insured car by an endorsement in respect of which his insurers required to know a good deal of detail. He sold the last substituted and insured car, without acquiring any further substitute. An accident later occurred (after a renewal), and the insured sought third-party indemnity. The issue litigated was whether the insurers through agents had renewed knowing that the insured no longer owned any car. It was assumed by all involved that “in the normal situation” it was clear on the authorities (particularly Rogerson) that the policy would be void after the sale of the last insured car (pages 190).
16. The relevant passages in MacGillivray include the following statements:
“29-16 The assured – extension of cover when driving other vehicles.
Motor vehicle policies frequently contain clauses extending to the insured when driving another vehicle which does not belong to him and is not hired to him under a hire-purchase agreement. …. Sometimes a proviso is added to the effect that such vehicle must have been being used at the relevant time instead of the insured car (Footnote: as in Rogerson …). This restricts the facility to the temporary use of another car while the car named in the schedule to the policy cannot be driven, so that, once the scheduled vehicle is sold, cover lapses and the extension is inoperative (Footnote: Rogerson …). Even in the absence of such a proviso the same result would follow if, upon a true interpretation of the insurance, the insurers were granting cover on the basis of the continuing user or ownership of the scheduled vehicle, and that vehicle was then sold (Footnote: Tattersall …; Wilkinson …; Boss …). In the case of a motor policy under which the premium is assessed by reference to a named vehicle and which places obligations upon the assured as regards the user and maintenance of that vehicle, such an interpretation will naturally be placed on it, but this need not necessarily be so in the case of all policies covering only third-party risks. …”
17. Hardy Ivamy contains this passage:
INSURED DRIVING CARS OTHER THAN THE INSURED VEHICLE
A typical clause in a policy states that:
“[The Company] will pay
The amount of
…. Damages and claimant’s costs and expenses
…. Any other costs and expenses agreed between [the Policyholder and the Company] in writing arising from bodily injury or damage to property for which the Insured person may be liable at law resulting from an accident … while an Insured Person is driving another car or motor cycle, but only when this is permitted in the Policyholder’s Certificate.
….
Effect of Sale of Insured Car
Where the insured car is sold, the indemnity extended to the Insured whilse driving any other care comes to an end.”
There follows discussion of Rogerson and Tattersall.
18. After considering the authorities, Bell J. said in the present case:
“…. I do accept Mr Doctor’s essential argument that those decisions concentrated, as they had to, on the particular wording of the material provisions in the different policies which they construed. I do not believe that one can deduce from the cases a general principle that in respect of all broadly similar policies of motor insurance the sole subject matter or insurable interest is the vehicle owned or held by hire purchase, and proposed by the insured, so that when it is disposed of without the substitution of another in accordance with the provisions of the policy, the policy lapses or becomes void.”
19. The judge’s reference to “subject matter” no doubt derives from Goddard J’s judgment in Tattersall. But Goddard J. cannot have been using the phrase as equating with or referring to insurable interest. It was, we think, no more than short-hand for a conclusion, as a matter of contractual construction, that cover under the particular clause insuring against third-party liability while driving another car was conditional upon the retention of the insured car. The reasoning in Rogerson and in Tattersall did not, in our view, depend critically on the fact that property insurance had been being taken out on the insured car, although that may have featured in the argument. In Boss there was no such property insurance at all, but only third party liability cover relating to (a) driving the specified motor cycle and (b) driving any other motor vehicle not belonging or hire-purchased to the policy-holder.
20. The central issue of construction in the present case is thus whether the third-party cover afforded while driving other cars depended or was conditional upon the insured’s continuing ownership of his own car (in respect of which it happens that in this case he did also take out property insurance against fire and theft). While each case turns ultimately on the terms of the particular policy, previous decisions cannot simply be put on one side, once one sees that they concerned policy wording in somewhat differing terms. The question is whether the difference is material: see MacGillivray, paragraphs 11.2-11.4. If it is not, we have to consider whether and to what extent we must or should follow the previous authority, which in the case of Tattersall and Boss is not binding on us.
21. We heard submissions as to the extent to which a reasonable insured might be expected to be aware of prior decisions on particular wordings or general statements about their effect like those to be found in MacGillivray and Hardy Ivamy. First, a prior decision must normally be taken as establishing the objective construction of a particular policy wording, unless there is some material change in the wording or context. Secondly, the present insurance was placed by the claimant through the defendants acting as his brokers, and insurance brokers may be expected to be aware of the general significance of particular cover and indeed owe a duty to advise clients at inception or when asked about its scope. But the fact that, in this case, it is asserted by the claimant (though not accepted by the defendants) that the defendants (through the claimant’s parents) advised that cover was continuing cannot indicate that that was or is a view that a reasonable broker would or should have held. That would be to prejudge the outcome of this action if it is allowed to proceed further. Indeed, in view of the apparent unanimity of direction in the textbooks and authority, there may be something to be said for a view that, even if the broker’s advice (assuming any to have been given as alleged) proves under this judgment to have been correct, nonetheless it should not have been given in apparently unqualified terms, or without confirming the existence of cover with insurers, so as to avoid any argument.
22. The essence of the judge’s reasoning was that nothing in clause (1) or any other insurance document in this case linked clause 1(1)(b) to cover continuing under clause 1(1)(a), and that it would have been easy to express such a link by adding words in clause 1(1)(b) such as “whilst still the owner or hirer on hire purchase of the Insured Vehicle”.
23. The judge’s reasoning thus distinguishes both Tattersall and Boss. Mr Doctor submits that this can be done. However, as stated, neither decision is binding upon us. Tattersall, Mr Doctor submits, is distinguishable because the clause there was expressed to be an extension clause, as well as containing the proviso to which we have referred. Boss, Mr Doctor submits, can be distinguished on a number of grounds. First, the motor car in Boss was specifically identified in the schedule. That is however, in our judgment, no material distinction. Under the present certificate incorporated into the policy the insurance “covers the vehicles last notified to and accepted by the Company” and “it describes the vehicle by Registration Mark (Form A) or by description (Form B)”. The present policy used Form B, and the last vehicle “notified to and accepted by the Company” was specified in the proposal form, with details as to make and model, type of body and seating capacity, cylinder capacity, estimated value, year of make, date of purchase and registration mark. The proposal also required information about any alterations, whether it was in sole ownership, its registered keeper, the main and other persons likely to drive it and anticipated use.
24. The proposal for the present insurance thus confirms that this was based on the insured having and wishing to insure himself in respect of his own car – here against fire and theft as well as third-party liability. That was on any view the origin and context of the policy. As indicated by Lord Parker’s first reason in Boss (and the nature of the proposal in this case), so here also the basic premium which insurers required (leaving aside no claims bonus and age related factors) will have depended first and foremost upon the details given regarding the car and its anticipated use and users. Mr Doctor, as we understand, accepts this. He adds that some premium may also be attributable to the third-party cover afforded by clause 1(1)(b) in respect of the driving by the insured of other cars (although it is not unknown for insurers to grant ancillary cover for no extra premium). The present proposal confirms the obvious, namely that premiums for motor insurance covering third party liability vary fundamentally according to factors related to the insured car (its characteristics), the insured and any others who will be permitted to drive it (their age, experience and record), and their likely user. No attempt is made in the present proposal to elicit information about other vehicles (not belonging or on hire purchase to the insured) that the insured might drive. So, in this sense, the driving of other vehicles must have been regarded as ancillary. This is so, whether or not any element of the premium was attributable to it. If any element of premium was attributable to it, it must have been a fixed element, not depending on particular circumstances. An insured may of course be bound under the general duty of disclosure to disclose any unusual matter relating to any anticipated driving of other vehicles. If such a matter were disclosed (for example if an insured intended as a matter of daily routine to drive someone else’s high-powered sports car in preference to his own run-of-the-mill vehicle), that could no doubt affect insurers’ willingness to accept the insurance at all or the premium. That would be a special and different situation, not applicable here. But, accepting all this, it is unclear how one derives from it support for a conclusion that the cover for driving other vehicles depended upon retention of the insured vehicle and so of cover while driving that vehicle. Insurers may not have been very concerned to try to rate the possibility that other cars might be driven, before or after disposal of the insured car, because this is, in the general frame of things, a less common and problematic aspect of risk. That does not lead to the conclusion that it is not a risk that insurers would tolerate in those cases where an insured disposed of (and did not replace) the insured car.
25. The second reason given by Lord Parker in Boss involves a statement about “the natural meaning” of the indemnity relating to liability whilst driving any vehicle not belonging or hired to the insured. Lord Parker viewed clause (2) in Boss as offering “temporary cover while the insured vehicle is out of use”. It may be, though he did not say so specifically, that his view was influenced by the opening words of clause (2) – “In terms of and subject to the limitations of and for the purposes of this policy ….” – and that he equated them to the express words of extension in Tattersall. Goddard J’s reasoning in Peters, where he described a clause with the same opening words as those in Tattersall as an “extension clause”, is certainly consistent with that view. In the absence of words like those opening words, Lord Parker’s view appears to us too narrowly expressed. Those who acquire and insure a car become accustomed to driving themselves, and there are many circumstances in which they may want cover while driving another’s car. On the face of clause 1(1)(b), there is no requirement that the insured vehicle should be “out of use”, or even that the use of any other vehicle should be “temporary”. Clause 1(1)(b) must cover situations where the insured vehicle is physically available for use, but the insured, in the ordinary course and for reasons entirely of his own convenience, prefers to drive another car – for example, a more comfortable car on a long journey or a friend’s car at destination after he chooses to take a long-distance trip to say Edinburgh by train or air.
26. Having regard to Lord Parker’s reasoning in Boss at page 102 (second paragraph), it might also be argued that the granting under the present policy of fire and theft cover on a specified vehicle, owned and kept by the insured according to the proposal, makes this a more obvious case than Boss for treating the whole cover as dependent upon a continuing assumption that the insured would have and retain possession of the specified car. That view is reflected in MacGillivray. But, it seems to us improbable that the scope of clause 1(1)(b) varies according to whether or not the insured elects for any property cover on the car. The basis of the proposal in Boss does not appear from the report. But the present insurers were clearly concerned to have full details of the insured’s car, and his relationship to it. The present insured (in common, we would think, with most insureds) also had a clear insurable interest in the car with which the insurance originated, whether he chose to take out property insurance on the car or not.
27. As to Lord Parker’s third reason, which Salmon J found decisive, the present policy contains similar provision in the shape of clause 11(5)) as regards maintenance of the insured vehicle in an efficient and roadworthy condition and the taking of all reasonable steps to safeguard it from damage or loss. Further, clause 11(8) of the present policy makes “the observance and fulfilment of the terms of this Policy so far as they relate to anything to be done or complied with by the Insured” (in other words, compliance with clause 11(5)) a “condition precedent to any liability of the Company to make any payment under this Policy”, in precisely the same way that clause 11(6) of the policy in Boss made compliance with, inter alia, clause 11(5) a condition precedent to any liability there. Further, clause 11(5) relates, clearly, to the liability cover, as well as the fire and theft cover afforded by this particular policy. In so far as it extends to the taking of all reasonable steps to safeguard the insured vehicle from damage or loss, it goes beyond the clause in Boss. Mr Doctor points out that it does not contain the further provision, present in Boss, whereby “the company shall have at all times free access to examine” the vehicle described in the schedule. That provision cannot however have been crucial to the decision in Boss, and its absence cannot constitute a material distinction between Boss and this case. We need not consider whether a right to inspect would anyway be implicit in the light of clause 11(5).
28. We prefer to leave for consideration on another occasion the question whether the impact of clause 11(5) read with clause 11(8) may, as a matter of construction, be confined to cases where indemnity is claimed either for loss or damage to the insured car (clause 2) or against third party liability while driving the insured car (clause 1(1)(a), rather than under clause 1(1)(b). The point evidentally did not occur to the Divisional Court in Boss. Mr Doctor did not suggest it as the correct interpretation of clauses 11(5) and (8). So we did not hear argument on it. The question may in fact amount to no more than a restatement, in another context, of the same question that we have to consider under clause 1. If clause 1(1)(b) provides merely ancillary cover, then it may be understandable that breach of clause 11(5) should undermine the whole policy. If clause 1(1)(b) is otherwise apt to provide independent cover, then it may be natural to try to read clause 11(5) as confined in its impact to clauses 1(1)(a) and 2.
29. The obligation under clause 11(5) is not an absolute obligation to ensure that the car never becomes inefficient or unroadworthy. It is an obligation to take reasonable steps to have it maintained from time to time either in accordance with normal procedures to prevent it becoming inefficient or unroadworthy or in response to any inefficiency or unroadworthiness which becomes apparent: see e.g. Conn v. Westminster Motor Insurance Association [1966] 1 Ll.R. 123 and 407 and McInnes v. National Motor and Accident Insurance Union Ltd. [1963] 2 Ll.R. 123. So we see no inconsistency with, and no reason to limit clause 11(5) in the light of the modified, cover provided by clause 7 (Service and Repair), which reads:
“This Policy (excluding the terms of Section 2 of Clause 1) shall operate while the Insured Vehicle is in the custody of a member of the motor trade for service or repair.”
30. We do however see considerable force in the submission that the court in Boss placed a greater significance on the similar provision to clause 11(5) there present than it can fairly bear. A requirement to maintain a car, as and when necessary, postulates continued possession of the car. Its subject matter is the insured car, and it can only operate so long as the insured retains the insured car. It is in Lord Parker’s words in Boss “really only apt in relation to a normal vehicle”. But it does not follow axiomatically that it requires the insured to retain the car, or that its inclusion indicates that any indemnity cover relating to other vehicles ceases after disposal of the insured car. On this it may simply be neutral.
We have dealt with the clauses which appear common to the policy in Boss and the present policy. But the present policy contains other relevant terms not present or considered in Boss. First, without going through the policy to identify every occasion, the policy wording contains many references focusing on the insured vehicle, without corresponding provision in respect of the driving of other vehicles. For example, the cover in respect of “Foreign Travel” specified in clause 6(3), (4), (5) and, probably, (6) is only afforded in respect of the insured vehicle. The General Exception in clause 10(6) relating to accidents or liability while in or on the various dangerous parts of an aerodrome is also limited to the Insured Vehicle. We incline to attribute this limitation, as regards liability cover, to oversight. Again, it suggests the policy’s focus on the insured vehicle.
31. Clause 9, Rebate for Laying Up, is also of interest. It provides:
“Upon notice being given to the Company that the Insured Vehicle is to be laid up and out of use, otherwise than as a result of damage or loss covered by this Policy, the Policy (except for Clause 2) will be suspended as from the date of receipt by the Company of the current Certificate(s) of Motor Insurance. The Company will allow an appropriate return of premium at the end of the period of suspension.”
32. Clause 2 is the property damage cover in respect of loss or damage to the insured vehicle (here only against the perils of fire and theft). So, if an insured wishes to lay up the insured car, he can only do so by giving up the cover under clause 1(1)(b). There is no right to restrict the cover to clause 1(1)(b) cover. That contrasts with the defendants’ submission that the insured can, under the same policy, always decide to sell his car and retain the benefit of clause 1(1)(b) cover until the date when it would otherwise have expired.
33. These two factors point in the same direction as Lord Parker’s reasoning in Boss. But an important pointer in the opposite direction, is in Mr Doctor’s submission, clause 11(1), the Replacement/Additional Vehicles clause. This has to be read with the clause on the reverse of the certificate whereby the Eagle Star reserved the right to decline to insure any vehicle. Under Form A, cover for an additional or replacement vehicle would depend upon notification and agreement. Under Form B, which actually applied, the only express condition of cover in respect of an additional or replacement vehicle is that its particulars should have been notified to the Eagle Star within 7 days of its acquisition. That being done, cover would presumably apply from acquisition.
34. Clause 11(1) refers to cover “for” or “in respect of” an additional or replacement vehicle, and does not therefore, expressly, address the cover provided by clause 1(1)(b) in respect of the driving of any other vehicle not owned or hired by the insured. It may be argued that this indicates that the cover under clause 1(1)(b) was intended to be independent and to continue even though the insured did not acquire, or give notice of acquisition of, any additional or replacement vehicle. But that would be an obscure way of indicating such an intention, and it is difficult to think that it played any role in the use of such words in relation to additional vehicles. The only possible effect of failure to notify an additional vehicle is to leave it uncovered, while the cover in respect of the original insured vehicle together with the cover for driving other vehicles would remain naturally untouched. An alternative and more likely possibility is that the draughtsman was not addressing his mind to clause 1(1)(b) at all. Failure to notify an additional vehicle can have no effect on the previous cover under clause 1(1)(a) and (b). Failure to notify a replacement vehicle means that there is no cover for or in respect of that vehicle. On this basis, if cover under clause 1(1)(b) is naturally dependent upon retention of the specified vehicle, then it too would fall on any failure to insure a replacement vehicle.
35. The significant feature of clause 11(1) in the present context is that it provides no period within which any replacement vehicle must be acquired. And there is under this motor policy no obligation to inform insurers of any disposal of the insured vehicle or any major change in circumstances during the policy period. All that clause 11(1) says is that notice must be given within seven days of any replacement. It is, no doubt, quite common for an insured to dispose of his insured car by trading it in against another car. But this is clearly not the only or even perhaps the most common situation. Garage trade-in values can usually be bettered elsewhere. Cars are bought and sold at auction and by advertisement. For this and many other reasons, there may well be delay between disposal of one car and its replacement. The basic submission of Mr Hytner QC for the claimant was that, if there was any gap, however short, between the times of these events, the policy lapsed and the latter could no longer be notified as a “replacement” under clause 11(1). We cannot accept that. The Eagle Star must we think be taken to have accepted – at the least – the risk of replacement not being achieved at the moment of disposal of the old car – and to have agreed to provide clause 1(1)(b) cover on a continuous basis.
36. Mr Doctor argues for a wide latitude in this context. In his submission replacement under that clause contemplates disposal of the insured car followed by its “replacement” by purchase of another car at any later time within the policy period. In the meantime, between the disposal and the acquisition of a new car, the insured would, he submits, be covered under clause 1(1)(b) in respect of the driving of any other car not owned by or hired to him. In a loose sense, no doubt, a person might speak of “replacing” a car, if he sold one car and, after a gap of almost any length (even years), bought another. We doubt whether the draughtsman of clause 11(1) was actually thinking so generally. The difficulty remains that he has not introduced any express limits. The clause must, in our view, be read as allowing some gap between disposal and replacement, and we have come to the conclusion that this gap cannot sensibly be limited to whatever the law might regard as de minimis. That would itself introduce a considerable and unsatisfactory uncertainty, and, unless de minimis was given an unusually expanded meaning, would appear unlikely to cater for quite common situations. It would also be most unsatisfactory if cover under the second indemnity continued for some period after disposal, only to cease abruptly at some entirely unspecific point in time, by when it was subsequently adjudged that it was too late to “replace”.
37. Although they were not reflected in any pleading and not considered in the judge’s judgment, we may refer at this point to statements by the claimant’s solicitors and by Mrs Dodson in their witness statements to the effect that, although the claimant took advantage of a favourable offer from a friend to sell his car on 17th April 1993, he was at all times thereafter, and still at the date of the accident on 16th May 1993, looking to get another car “shortly”. He never in fact acquired or gave notice in respect of any replacement. If these facts were established, and in the absence of any guidance in the policy, could the insured then still be said to be replacing his car within the meaning of clause 11(c)? And if not, then what if the gap had been only two weeks or one week? Mr Hytner’s analysis cannot answer these questions satisfactorily or clearly, except by the unacceptable submission that all cover ceases automatically unless a replacement car is acquired before or at the time of the disposal of the insured car.
38. It is also worth noting the position under a certificate describing the insured car in Form A, although Form B applied in this case. Again, there is no period provided within which the replacement vehicle must be obtained. But cover for such a replacement depends on obtaining a cover note before the replacement vehicle “is used” (see the certificate). No cover applies for a replacement vehicle “until the Company has been notified of such …. replacement and a [fresh] Certificate of motor insurance has been received by the insured”. Again, there is nothing to indicate that these steps must be completed before the original insured car is disposed of. Yet, on Mr Hytner’s case, as soon as the original car is disposed of, the policy cover would come generally to an end. We think that, under a certificate in Form A, any insured would be entitled to assume that there could be a gap between disposal of his old car and completion of the steps necessary to obtain insurance for a fresh car, without prejudicing his continuing right to rely on the policy, including his right to rely on the second indemnity in respect of liability while driving another car not owned or on hire purchase to him.
39. It may also be of some interest to consider what happens regarding premium if cover lapses automatically upon or after disposal of the insured vehicle without replacement. There will have been no total failure of consideration. There is nothing to entitle an insured to a pro rata or other return of premium. Yet, if all cover ceases entirely on disposal without replacement of the insured car, the insured will be left (i) without cover under clause 1(1)(b) at the very moment when he is likely to require it and (ii) without any right to any return of premium. As to (i), it may be said that driving other people’s cars on a regular basis in circumstances where one has no car at all of one’s own involves different risks from driving such cars on an ancillary basis, when one retains one’s own car. That is however itself speculative. Many car-owners after sale of their own cars may have very little opportunity to borrow or drive other cars. To postulate extreme situations (such as the driver who, a month into the insurance, disposes of his own car and is lent his father’s Ferrari on a regular basis) does not assist. Insurance involves a general pooling of diverse risks, some of which may well always be extreme. The general insurance assumption is that it is possible to cater for the rare extremes by predicting and rating the mean. As to (ii), a partial answer may be that insurers are in practice willing to concede a return of premium (though not necessarily strictly pro rata) if a motor insured wishes to cancel and return the certificate for any reason. The same objection would anyway arise under a policy excluding any cover along the lines of clause 1(1)(b) (if such policies are ever issued), and it is perhaps also unlikely that clause 1(1)(b) was included to meet this objection, since (as we have pointed out) there may well be insureds who, after disposal of their own car, have no possibility of or interest in driving anyone else’s car and so would obtain no benefit from clause 1(1)(b) in any event.
40. The judge said that, if Eagle Star had intended clause 1(1)(b) to bear the meaning for which the claimant contends, it would have been easy to have inserted some words such as “whilst still the owner or hirer on hire purchase of the Insured Vehicle” at its beginning. The same argument could have been, and quite probably was, run in Boss. It is almost always possible on any point of construction to say after the event that the point could have been put beyond doubt, either way, by express words. So we are not particularly impressed by this argument. Bearing in mind the tenor and terms of the authorities and texts up to the present date, it might, if anything, be said that, so far as it has any force, its force lies in the opposite direction to that which the judge suggested: if clause 11(1) had been intended to confer or reflect the independence in scope of cover under clause 1(1)(b) for which Mr Doctor contends, in contrast to the more limited cover recognised in Tattersall and Boss, one might have expected that intention to have been made more explicit. The matter is also more complicated than the judge thought. Any addition to clause 1(1)(b) would have to take account of clause 11(1) relating to Additional/Replacement Vehicles. The wording suggested by Mr Doctor to the judge would immediately achieve the unacceptable result that, if there was a minimal gap occurring, in the ordinary course of replacing the insured car, between its disposal and its replacement, then clause 1(1)(b) cover would cease during that gap. That does not however mean that I disagree with the judge that some formula could quite readily be devised by insurers to reflect the intention for which Mr Hytner contends, if that does represent insurers’ intention. I am sure that it could be.
41. Looking at the arguments overall, we confess to having been concerned as to whether we can – at least without creating unacceptable uncertainty – satisfactorily distinguish Boss, a case which has stood for nearly 40 years and received a general interpretation in the leading insurance texts. But at the end of the day, we have come to the conclusion, firstly, that the presence of the Replacement/Additional Vehicles clause constitutes a very relevant distinction between this policy and that considered in Boss. The absence from clause 1(1)(b) of any wording equivalent to the opening words of clause (2) in Boss may also constitute a relevant distinction. Under clause 1(1)(b), insurers must be taken to have accepted that cover while driving other cars could continue after disposal of the insured car, and we see no satisfactory stopping point, short of a conclusion that such cover is independent of the retention or replacement of any insured car. Secondly, we regard the reasoning in Boss as itself open to substantial doubt. Insurance wordings should be clear. If cover under an apparently independently worded indemnity clause is intended to depend upon retention or replacement of the insured car, to which the cover does not relate, or upon continuation of cover under a separately expressed indemnity clause, one would expect this to be clearly stated. In case of any real ambiguity (and this is in our view, at lowest, such a case), an insurance wording such as the present falls to be construed against the insurers whose standard wording it is and who put it forward contractually in apparently general terms and then seek to read into it an unexpressed restriction of their liability. On this basis, we consider that Lord Parker’s second reason in Boss is open to legitimate criticism, at least so far as it was formulated as a general proposition, not based on any language particular to the policy in case. We have already given reasons for doubting the validity of his first and third reasons, when reviewing them earlier in this judgment.
42. The uncertainty involved in unsettling an apparent consensus of view about the scope of a second indemnity such as clause 1(1)(b) in this policy has caused us the greatest concern. But all the authorities recognise that the point is ultimately one of construction of the individual policy. There is here, on any view, one major material difference, constituted by the Replacement/Additional Vehicles clause, as well as the difference in wording of the relevant indemnity. Further, our decision can only affect current and recent policies (and then still only policies which do not make the position clear one way or the other). At the end of the day, and after some hesitation, we have come to the conclusion that it is more important to re-enforce the message that insureds are entitled to clear wordings and to the benefit of any ambiguity, than to force the present particular policy wording (and probably other policy wordings in future) into an artificial mould dictated by legal authority. If any insurer does not like our decision, it can for the future formulate its policies differently, provided that it makes its intention clear. Indeed, we would consider it desirable that motor insurers should in any event – and whatever such intentions may be – ensure that their intentions on the present point are made express in their wordings- to avoid yet further disputes and decisions in the series currently ending with this judgment.
43. We therefore dismiss this appeal and uphold the judge’s declaration that, following the claimant’s sale of his car on 17th April 1993 without replacing it, the claimant was covered under clause 1 of the policy during the remainder of the policy period in the event of his driving, with the owner’s permission, any motor car not belonging to and not held under a hire purchase agreement by him.
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