When are Insurance Companies
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"on Risk"? By Our Legal Adviser THE case, reported in The Commercial Motor dated June 24, in which an operator and driver successfully defended summonses for using a vehicle while uninsured, by calling on their behalf an official of their insurance company to say that his company "took a broad view of the conditions imposed by the licence," and that they would .have paid out in the event of a claim, has naturally called forth some well-informed comment.
There have, in recent years, been many instances of insurance companies giving through their authorized representatives similar evidence upon the prosecution of one of their insured customers, and at first glance the criticism that such an undertaking by them is irrelevant to the offence itself is hard to answer. Nevertheless, there have been sufficient authoritative decisions in the Divisional Court recently to make the position fairly clear.
Indemnity Offered
In the case of Egan v. Bowler (1939), a certificate of insurance contained a limitation of use to the policy holder's business under a C licence, not covering the carriage of passengers for hire or reward. When stopped by the police, the policy holder was carrying his wife and children not on business, and the insurance company concerned wrote to the police that they would indemnify under the policy in respect of private pleasure purposes.
It was held, however, that the policy as it stood did not cover the risk and accordingly the policy holder had committed an offence under Section 35 (1) of the Road Traffic Act, 1930.
From this decision it appears quite plain that where in fact the insurance policy does not provide the cover required, a statement by the insurers either that they regarded themselves as being "on risk," or that they would have—as a matter of grace—provided indemnification in the event of an accident and a third-party claim, can make no difference to the fact that an offence has been committed. The difficulty really lies in the words "in fact," for this is a matter of law and involves determination of the risk and interpretation of the terms of the policy itself.
Teasers for the Bench Insurance law and points of construction of policies are often involved and tax the best brains on the Bench. It is somewhat surprising to realize, therefore, that to ascertain whether a driver has committed the summary offence of driving while uninsured, a collection of lay magistrates---who have inevitably neither the capacity (even when advised by their clerk) nor the time for abstruse problems of law—may have to consider the interpretation of the policy.
This they may have to do in the absence, as a party to the proceedings, of the most important party to the document apart from the insured—the insurance company itself. It is one thing for a representative of the company to give evidence as to the company's view, and another for its view to be supported by legal argument, which would be the case if it were a party to the proceedings.
It has been held that although such expressions or undertakings by the insurance company cannot affect the conviction for the offence of being uninsured where that.is the true position in law, they may well be most relevant to the question of punishment. The offence is one that carries automatic disqualification even for a first offence unless the couft considers that "special reasons" exist why it should not be imposed, and it has many times been laid down by the Divisional Court that such " Special reasons" must be peculiar to the offence itself and not to the offender.
Thus in Pilbury v. Brazier (1950) the defendant owned a fleet of taxicabs and because of an oversight one had been returned to service after repairs, during which the insurance had been suspended without the underwriters being informed. The latter informed the police that they would nevertheless have considered themselves • " on risk."
Lord Goddard, Lord Chief Justice, in holding that special reasons existed why disqualification should not be imposed, said: "It was often found that, as a technical and strict construction of a policy, underwriters would not be liable to indemnify, such as where a man forgot to renew his driving licence, but no responsible underwriter would take the point against his client. If in such a case insurers informed the Court that they considered themselves liable and would have met any claim, it was clear that the mischief to which the Act of 1930 was directed did not arise." e
Facts in Doubt Finally. in Carnill v. Rowland (1953), the matter was carried a good deal farther. A temporary cover note was issued restricted to the use of a motorcycle to which a sidecar was permanently attached. The insured removed the sidecar body and drove with only the sidecar chassis and wheel and was summoned for driving uninsured. The insurers gave evidence that for the purposes of the policy they regarded what was attached as a sidecar and would have held it covered.
The Divisional Court upheld the dismissal of the summons after an appeal by the prosecutor, taking the view that, as there was a genuine doubt as to the interpretation of the facts and the cover, it was possible for the justices to do as they had done and resolve their doubt in favour of the accused by refusing to make a conviction.
Mr. Justice Lynskey Put the matter clearly when he said: "If a condition in a policy is so broad that it has only one meaning, and that meaning is to exclude the insurance company from liability under certain conditions, the court is bound by that clause and must act on it. But if you have a clause whichis open to two constructions, it is for the court to construe that condition in the policy 'contra proferentem,' that is, against the insurance company."
The report of the Biggleswade case is too short for effective criticism of,the dismissal of the summons to be made, but it certainly appears that the court was in error in accepting the insurers' undertaking as to their liability when there does not seem to have been real doubt as to the ineffectiveness of the cover. In such a case. evidence could only go in mitigation.