Court of Appeal finds motor insurer not liable to cover liability incurred by insured for allowing a third party to drive her car without insurance

The claimant's car was damaged by another vehicle. That vehicle was being driven by someone who had no insurance. However, that vehicle was owned by a car hire company which had hired the car to the defendant. The defendant had given the uninsured driver of the vehicle permission to drive it, and the claimant obtained default judgment against her, for breach of section 143 of the Road Traffic Act 1988 ("the Act").

The car hire company and the defendant were both insured and the claimant argued that the insurer should meet the default judgment against the defendant. At first instance, it was held that the defendant's liability under section 143 was not a liability which was statutorily required to be covered under section 145 of the Act, and so the insurer was not liable to the claimant.

The claimant appealed and the Court of Appeal has now upheld the first instance decision.

Section 145 of the Act provides that a motor insurance policy must insure the insured (here, the defendant) in respect of any "liability which may be incurred by [her]…in respect of damage to property caused by, or arising out of, the use of the vehicle on the road". The key question was therefore whether permitting someone to drive a vehicle is "using" that vehicle on a road. The Court of Appeal held that it is not: "To my mind permitting the use of a vehicle is not the same as using the vehicle. Section 143 of the 1988 Act draws a clear distinction between the two …It must follow that the liability of someone who permits another to use a vehicle without an insurance policy is not a liability which is itself required to be insured under section 145 and is not therefore a liability which an insurer is obliged to satisfy under section 151".

Furthermore, the terms of the policy did not cover this liability.