Section 151 of the Road Traffic Act 1988, whilst a very useful provision for claimants is by no means a panacea and it can be important to understand its limitations. In certain circumstances an insurance company can avoid having to satisfy a judgment by reason of the existence of a black letter insurance law defence. In particular what might seem an open and shut case, may not be, dependent on the interplay of article 75 and section 151.
I start with consideration of section 151 itself.
151.— Duty of insurers or persons giving security to satisfy judgment against persons insured or secured against third-party risks.
(1) This section applies where, after [a policy or security is issued or given for the purposes of this Part of this Act,] 1 a judgment to which this subsection applies is obtained.
(2) Subsection (1) above applies to judgments relating to a liability with respect to any matter where liability with respect to that matter is required to be covered by a policy of insurance under section 145 of this Act and either—
(a) it is a liability covered by the terms of the policy or security […] 2 , and the judgment is obtained against any person who is insured by the policy or whose liability is covered by the security, as the case may be, or
(b) it is a liability, other than an excluded liability, which would be so covered if the policy insured all persons or, as the case may be, the security covered the liability of all persons, and the judgment is obtained against any person other than one who is insured by the policy or, as the case may be, whose liability is covered by the security.
(3) In deciding for the purposes of subsection (2) above whether a liability is or would be covered by the terms of a policy or security, so much of the policy or security as purports to restrict, as the case may be, the insurance of the persons insured by the policy or the operation of the security by reference to the holding by the driver of the vehicle of a licence authorising him to drive it shall be treated as of no effect.
(4) In subsection (2)(b) above “excluded liability” means a liability in respect of the death of, or bodily injury to, or damage to the property of any person who, at the time of the use which gave rise to the liability, was allowing himself to be carried in or upon the vehicle and knew or had reason to believe that the vehicle had been stolen or unlawfully taken, not being a person who—
(a) did not know and had no reason to believe that the vehicle had been stolen or unlawfully taken until after the commencement of his journey, and
(b) could not reasonably have been expected to have alighted from the vehicle.
In this subsection the reference to a person being carried in or upon a vehicle includes a reference to a person entering or getting on to, or alighting from, the vehicle.
(5) Notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy or security, he must, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment—
(a) as regards liability in respect of death or bodily injury, any sum payable under the judgment in respect of the liability, together with any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum,
(b) as regards liability in respect of damage to property, any sum required to be paid under subsection (6) below, and
(c) any amount payable in respect of costs.
The learned author of Macgillivaray on Insurance Law has noted this about the construction afforded to section 151 and I have highlighted the particular sentence that requires emphasis:
31-025 For s.151 to operate, it appears that there must be an apparently valid policy which in terms covered the use to which the insured vehicle was being put at the time, but assuming, for the purposes of the section, that the policy covers driving by any person regardless of whether or not that person holds a valid driving licence.162 On the other hand, the insurers are not disentitled from reliance on a nondisclosure or misrepresentation or breach of warranty which would entitle them to avoid or cancel the policy as against their insured, subject to their due compliance with the procedure laid down by s.152.163 The third party is further assisted by s.148(1) and (2) which avoid certain terms of policies otherwise providing a defence to insurers against claims made on the policy.
The case of Bristol Alliance Partnership v Williamson  QB 806 is recent and binding. It explains how section 151 is to be construed, and in particular the effect that limitations on use may have: if a car is involved in an accident when it is being used for a purpose not covered by the terms of the insurance policy, it is clear that no claim can succeed under section 151. Instead, the insurer is going to be involved under the MIB agreement as article 75 insurer.
Paragraph 12 of the judgment notes:
Article 75 of the MIB’s memorandum and articles of association provides that the article 75 insurer , namely the member who at the time of the accident which gave rise to the liability was providing any insurance in respect of the vehicle, even if use of the vehicle is other than that permitted under the policy, must pay the original judgment creditor such sum as is due and outstanding under the Road Traffic Act judgment.
The detailed analysis of section 151 is contained in the judgment of Ward LJ who began as follows with a detailed, exhaustive (and exhausting) analysis of the general scheme under the Act:
34 It is common ground that there are four preconditions for the third party victim to satisfy: (1) that “a certificate of insurance has been delivered under section 147 ” ( section 151 ); (2) that “a judgment to which this subsection applies is obtained” ( section 151(1) ); (3) that the judgment relates “to a liability with respect to any matter where liability with respect to that matter is required to be covered by a policy of insurance under section 145 ” ( section 151(2) ); and (4) that the liability is “covered by the terms of the policy … to which the certificate relates”: section 151(2)(a) .
35 It is also common ground that conditions (1) to (3) are satisfied. The dispute centres on condition (4). In a nutshell the vital contentions are these. The second defendant contends that because the policy excludes liability for deliberate acts, the liability is not “covered by the terms of the policy” and so this essential precondition for imposing liability on the insurer pursuant to section 151(2)(a) is not satisfied. The claimant denigrates this argument. The purpose of Part VI of the Act is entirely concerned with protecting victims from the financial consequences of an injury caused by a driver that is not the victim’s fault. Thus, submits the claimant, if the second defendant is correct, then it is open to an insurer to sell policies to drivers on the basis *827 that they comply with the requirements of the Act and to issue a certificate of insurance to confirm that fact, but then to insert terms in the policy that undercut the minimum terms which ought to ensure the victim’s protection and so to refuse to compensate on that basis. It is a good jury point. The legal foundation upon which it has to rest is that the error in the second defendant’s argument is to fail to give proper meaning to the words which followed “covered by the terms of the policy”, namely, “to which the certificate relates”. The certificate relates to a policy that is certified as satisfying the requirements of the relevant law applicable in Great Britain and therefore must include a liability to compensate third parties for damage caused by the assured even when engaged in a criminal or deliberate act.
36 Since section 151 must be construed in the context of Part VI as a whole, it is necessary to see how this statutory scheme for compulsory motor insurance is designed to operate. Part VI , the forerunner of which goes back to Part II of the Road Traffic Act 1930 , is there to provide protection for those who sustain injury or damage caused by the use of a motor vehicle on a road or in a public place and it does so by providing for compulsory insurance in respect of third party risks. Section 143 is the starting point of the legislative scheme. Section 143 prohibits the use of a motor vehicle on a road or in a public place without there being in force “such a policy of insurance … as complies with the requirements of this Part of this Act”. To use the vehicle without such insurance is a criminal offence. It is clear that it is the duty of the user to ensure that “there is in force in relation to the use of the vehicle by that person such a policy of insurance … as complies with the requirements of this Part of this Act”. The important words in section 143 are “in relation to the use of the vehicle”. In other words the user’s duty (and no one else’s) is to ensure that insurance cover is in place whenever and however he uses the vehicle. If the use is not covered then he is not insured and criminal sanctions will follow that illegal use.
37 The next question which has to be answered is this: when will the policy of insurance comply with the requirements of Part VI of the Act? The answer is given in section 145 . Note how section 145(1) introduces the answer: “In order to comply with the requirements of this Part of this Act, a policy of insurance must satisfy the following conditions.” The claimant is correct in submitting this is a neutral provision: it does not stipulate that the user must take out a policy of insurance complying with the Act nor does it say that the “authorised insurer” has to issue a policy which complies with the Act. (An “authorised insurer” is defined in section 95 of the Act to mean an insurer who is a member of the Motor Insurers’ Bureau.) The purpose of section 145 is to specify what the “requirements in respect of policies of insurance” are. Subject to the exclusions provided by subsection (4) , the policy must pursuant to subsection (3) “insure such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person or damage to property caused by or arising out of the use of the vehicle on a road or other public place.” The claimant properly emphasises the word “ any ”. “ Any ” damage would include deliberate damage. If there could be doubt about it, Hardy v Motor Insurers’ Bureau  2 QB 745 and Gardner v Moore  AC 548 *828 dispel those doubts. Thus a requirement of Part VI of the act is that deliberate damage to property must be covered by the policy of insurance.
38 Reading sections 143 and 145 together, the scheme of the Act seems perfectly plain. “Do not use a motor car on the road unless you have insurance covering any liability (including liability for your deliberate acts) which you may incur in respect of damage to property which arises out of your use of the vehicle.”
In other words it is the duty of the user to make sure that his use is covered by insurance. That is the effect of the established authority. See Lord Denning MR in Hardy v Motor Insurers’ Bureau  2 QB 745 , 760: “the policy of insurance which a motorist is required by statute to take out must cover any liability which may be incurred by him.” So too Kennedy LJ, at para 9 of Charlton v Fisher  QB 578 : “it remained the obligation of the … user of the vehicle to restrict the user so as to keep it within the terms of the cover.” Then there is para 63 of the judgment of Rix LJ in Charlton v Fisher : “the statutory duty to comply with the requirements in respect of compulsory insurance is upon the driver, not the insurer.” I agree.
39 Under the statute not all damage to property has to be covered. Subsection (4) states that the policy shall not be required to provide for, among other things, insurance of more than £1m in respect of damage to property arising out of any one accident: section 145(4)(b) . Nor shall the policy cover liability in respect of damage to goods carried for hire or reward in the vehicle: section 145(4)(d) . The question is whether this is an exclusive list and whether other forms of liability may be excluded by agreement between insurer and assured. If the list was intended to be all-embracing the statute would surely have said so.
40 Section 147 introduces the certificate of insurance into the scheme. That the certificate has an important part to play is demonstrated by the fact that the policy of insurance shall be of no effect for the purposes of Part VI unless and until the certificate is delivered by the insurer to the person by whom the policy is effected. The claimant relies upon the fact that the certificate must be in the prescribed form and must contain such particulars of any conditions subject to which the policy is issued and of any other matters as may be prescribed. As set out at para 10 above, the 1972 Regulations require the certificate to be in Form A and thus to give information as to any limitations as to use. It has, however, never been doubted, so far as I know, from the earliest days of compulsory motor insurance that the certificate of insurance does not trump the terms of the policy. Branson J was dismissive of the contention to the contrary, saying in Gray v Blackmore  1 KB 95 , 103:
“the defendant issued a certificate of insurance under the Road Traffic Act 1930 and that certificate is in the prescribed form, and that certificate contains upon the face of it, under the heading ‘Limitations as to use’, this other provision that the policy does not cover the use of the car for any purpose in connection with the motor trade. In view of that express statement upon the face of the certificate of insurance, I cannot think there can be anything in the next point taken upon this policy, to wit, a point that some estoppel arises to prevent the defendant from relying *829 upon that limitation against the assured. The suggestion is that, because at the foot of the certificate of insurance there is a certificate that the policy is issued in accordance with the provisions of the Road Traffic Act 1930 , and because it is contended that the policy is not in accordance with the provisions of the Road Traffic Act if it contains any limitations as to the use of the car at all, therefore the defendant is estopped from saying that that the limitation has an operation against the plaintiff. I cannot see how any estoppel can begin to arise in the matter, and I say no more about that point.”
I agree with that and that is probably enough to sink the claimant but in deference to the sustained arguments advance to us on both sides, I carry on.
Importantly he then considered limitations on use and whether a limitation on use was material to the operation of section 151:
45 We are about to get to section 151 . The scheme of the Act is by now established. There is no exhaustive list of matters which cannot be excluded from the cover of the policy. Other exclusions are effective. Thus the validity of such time-honoured limitations on use, for example, for social, domestic or pleasure purposes have never been doubted. If there is a social domestic or pleasure limitation, then to use the vehicle, insured in that way, for hire or for business would be to use the vehicle illegally because use for hire or for business would not be covered by the policy and the use for that purpose would be uninsured. As I have already said, it is the responsibility of the user to ensure that the use to which he put the vehicle is covered by the *831 terms of the policy taken out in respect of the vehicle he is using. If the policy limits the cover, then it is obvious that the premium would be lower than it would be if each and every use, without exception, had to be covered. The motorist has the freedom to select a policy to match his need and to pay the price accordingly. That has to be good for us all.
This is most significant. Because what can be a defence to a claim under section 151 against an insurer, can be a plea that the vehicle driven by the tortfeasor was being used contrary to the permitted uses.
Ward LJ then moved onto address section 151 directly:
46 That is the context in which section 151 takes its place in the scheme. Section 151 is at the heart of the scheme because it is section 151(5) which “subject to the provisions of this section” imposes on the insurer the liability to pay the innocent third party victim any damages payable under a judgment he has obtained in respect of that damage, in this case, to property. The liability of the second defendant therefore depends upon the four preconditions set out in section 151(1)(2) being satisfied. As set out at para 29 above, this depends on whether the defendant’s liability “is a liability covered by the terms of the policy … to which this certificate relates” as required by section 151(2)(a) .
47 Mr Palmer for the second defendant has a short and simple answer to this appeal. Liability for this damage is not covered by the terms of the policy because the terms of this policy expressly exclude any damage caused by the deliberate act of the driver. It is as short and as simple and as attractive as that. One has to acknowledge the seductive attraction of the KISS argument (“Keep it short and simple”) but hard-hearted judges have to steel themselves against its beguiling allure. Before falling for Mr Palmer’s charm, and saying, “Sounds perfectly sensible to me, Mr Palmer”, I have to acknowledge that Mr Ross has a worthy point when he submits that the words “to which the certificate relates” have to be given some meaning: they cannot simply be dismissed as otiose.
48 These words did not appear when first the legislature gave the injured third party the statutory remedy against the insurer. The original enunciation of the rule was contained in section 10 of the 1934 Act, which was in these terms:
“(1) If, after a certificate of insurance has been delivered under subsection (5) of section 36 of the principal Act to the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of subsection (1) of section 36 of the principal Act (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then notwithstanding the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability …”
The meaning is clear enough: the insurer’s liability must not only be of the kind which the Act requires must be covered but it must also actually be covered by the policy. These are two separate preconditions.
49 Section 207 of the Road Traffic Act 1960 is the first to introduce the words upon which Mr Ross relies and that is repeated in section 149 of the Road Traffic Act 1972 . The words in parenthesis are enlarged, with my emphasis added, so as to read “(being a liability covered by the terms of the policy or security to which the certificate relates ) …”
50 The outcome of the appeal depends upon whether these additional words have made any difference. In my judgment they have not. In the first *832 place, as Lord Hailsham LC said in Gardner v Moore  AC 548 and as I have already pointed out, the history does not affect the construction. Secondly, and in answer to the point made by Mr Ross, these additional words do serve a purpose, namely to link the first requirement (delivery of a certificate of insurance) to the very policy which covers the liability. This is more obvious when, for the first time, the 1988 Act divides section 151 into constituent parts. Let us look at section 151 again. Pursuant to section 151(1) this section applies where, after a certificate of insurance has been delivered to the person by whom a policy has been effected, judgment is obtained. Note the use of the indefinite article. At this stage we do not know exactly what policy that is. The judgment is defined in section 151(2) being a judgment relating to a liability with respect to any matter where liability with respect to that matter is required to be covered by a policy of insurance under section 145 . Once again the indefinite article is used and so we are still not yet sure at precisely which policy the section is being aimed. Clarification is given by section 151(2)(a) . The liability must be “covered by the terms of the policy to which the certificate relates”. Now we know what we are looking for. We are looking for the policy to which the certificate of insurance relates. A certificate of insurance relating to that policy has to be delivered. Liability has to be covered by the terms of that policy. Thus the necessary identification of the policy and the link to the delivery of the certificate of insurance is provided by the very words Mr Ross wrongly submits are otiose. Section 151(1)(2) now has coherence. It leaves Mr Ross with no answer to Mr Palmer’s short and simple point.
51 One should not, however, leave section 151 without considering subsection (3) . So much of the policy as purports to restrict the insurance to the driver holding a licence authorising him to drive the vehicle shall be of no effect. Just as was the case under section 148 , some limitations on liability are void. Turning the tables on Mr Ross, Mr Palmer submits that this would be quite otiose if, as Mr Ross contends, all exclusions of liability are prohibited. On the claimant’s case, the terms of the policy may dictate the position as between the assured and the insurer so as to deny the assured his right of indemnity from the insurer for any damage the assured may suffer but, says the claimant, as between the third party and the insurer, the minimum requirements prescribed by section 145 cannot be undermined. The purpose of section 151 is to secure the third party’s right to recovery whatever the terms of the policy may dictate as between policy holder and insurer. That simply cannot be correct. Mr Palmer must be right in asserting that there would be no need for section 151(3) nor for section 148(4) if the only requirement of section 151 is that the liability is of the kind which ought to have been covered by a policy complying with section 145 even if the actual policy does not cover that particular liability.
52 The final stake driven into the heart of the claimant’s argument is that it is common ground that section 151 lays down two preconditions for the insurer’s liability, the first being that liability is required to be covered by a policy of insurance which satisfies section 145 and the second that the liability is actually covered by the terms of the policy to which the certificate relates. If, as the claimant contends, section 145 was to impact on the actual policy issued so as to require every liability which has to be covered pursuant to section 145 to be treated as if it were covered by a policy, then there would be no need for this second precondition. All that would be needed to make *833 the insurer liable is that the insurer has issued a policy of motor insurance and the policy holder or an authorised driver has caused the third party to suffer some loss through his use of the vehicle on the road.
The final paragraph that I need to cite, is absolutely plain:
53 Mr Ross had to accept under gentle prompting from me at the start of the second day of this hearing that if the insurance cover was limited to social domestic or pleasure use, then that limitation would be, or should be, noted on the certificate of insurance. If so and the vehicle was used for a business purpose or for hire, then any liability arising from such impermissible use would not be covered by the terms of the policy. He had to accept that in those circumstances the third party would have no claim under section 151 and would be driven to seek his remedy under the MIB Agreement . In other words Mr Ross has to accept that some limitations on use are permissible. He has to say that those limitations are confined to the conventional limitations. He cannot satisfactorily explain to me why a limitation which excludes liability for road rage or deliberate acts is not a limitation to which effect has to be given.
It follows that when considering an action under section 151 to enforce a judgment (often obtained by default) against an insurance company, care must be given to consideration as to whether in fact, they might have a defence grounded in insurance law after all.