Imagine your brand new Porsche is brazenly stolen only yards from where you are standing. What happens if your claim is excluded because your keys were left in the ignition?
This issue recently came under the spotlight. Hayward vs Norwich Union attracted attention because the court initially allowed the insurance claim and rejected the defence by the insurers. On appeal, Norwich Union succeeded in overturning this ruling.
The insured owned a new Porsche, valued at £65,000. On the way to London, he stopped to fill up with petrol and, having filled the car, walked across the forecourt to pay. At no point was he further than 25 yards away from his car. He'd left the keys in the ignition and the door unlocked, relying on an engine immobiliser that activated automatically 30 seconds after the engine had been switched off. The immobiliser was controlled by a device hidden beneath the seat.
While queuing to pay, the man noticed someone in his car and ran over to see what was happening. When he reached the passenger door, it was locked and someone was sitting in the driver's seat with a box on his lap (later thought to be the “code grabber” used to disarm the immobiliser). Trying to prevent the theft, the insured stood in front of the car but, fearing he would be run over, moved out of the way when the thief revved up the engine. The car was driven off at high speed and never recovered.
After investigating the claim, the insurers denied liability on two grounds. Firstly, a provision in the policy excluded cover for “loss or damage arising from theft while the ignition keys... have been left in the car or on the car”. The insurers also claimed that there was a breach of a policy requirement “at all times (to) take all reasonable steps to safeguard (the) car from loss or damage”. The insured issued proceedings to recover his loss.
LRG Deputy Judge Tugendhat found in favour of the insured for two reasons.
Firstly, although the keys were in the ignition, the man was still in the proximity of the car, therefore the keys had not been “left” in the car for the purposes of the insurance policy.
Secondly, the requirement to take reasonable care amounted to no more than a duty on the insured not to act recklessly – that is, recognising that a risk of loss exists but not caring whether his conduct would avert the loss.
Although satisfied that the insured had been negligent, the judge found that his conduct had not been reckless. Insurers appealed against both grounds of the decision. In the Court of Appeal, Lord Justice Gibson reviewed the principles of construction of insurance policies.
The starting point was to look at the ordinary and natural meaning of the words as understood from the background against which they were used, or the meaning that the document would convey to the reasonable man. He also referred to the common law rule that an ambiguity in the wording of a policy must be resolved against the party that prepared it, usually the insurer.
However, he differed from the judge on the application of these principles to the facts in question. In Gibson's opinion, instead of starting with the plain and ordinary meaning of the words, the judge had considered whether the words were ambiguous and if the results consequent on their adoption were unreasonable.
Gibson also pointed out that the judge referred to several internal memoranda disclosed by Norwich Union, which stated that it had never intended to apply a strict literal interpretation of the wording in question. For example, one memo stated it would not consider repudiating a claim where the insured had essentially been “hijacked”, albeit that the key may be in the ignition. Gibson didn't see how these documents were helpful in interpreting the words in the policy.
The meaning of ‘left'
Gibson's approach was to look at the meaning of the words “have been left” in the context of the policy exception. He concluded that, in their ordinary usage, they imply: (1) the leaver of the keys has caused or allowed them to remain in or on the car, whether through choice or inadvertence, and (2) the person has moved away from the keys.
He saw the purpose of the exception as being to encourage policyholders to take precautions in relation to their ignition keys to reduce the risk of opportunistic theft. He found that the ordinary connotation of the words “have been left” was consistent with that purpose.
Judge Tugendhat had relied on an earlier decision in Star Fire Diamond Rings vs Angel (1962) to support a finding that “have been left,” means “have been left unattended”. Gibson pointed out that, in Star Fire, the word “unattended” had been expressly included in the policy term. He also said the considerations applying to the phrase “vehicles left unattended” differ from those applying to “ignition keys ... have been left in or on the car”.
He cited the example of O'Donoghue vs Harding (1998), in which a court held that a vehicle was not left unattended after it had been locked when the driver had gone to pay for his petrol.
Gibson saw this as very different from the situation where a driver goes to pay for petrol while leaving the car door unlocked and the keys in the ignition. The driver has a clear choice of whether to take the keys into the garage with him – but not whether to take the car inside when he pays for the petrol.
Gibson accepted that there might sometimes be difficulties applying the words “have been left” but this did not lead him to conclude that the words were ambiguous or that their interpretation was so doubtful that an interpretation more favourable to the insured should be adopted.
He concluded that: “On the plain and ordinary meaning of the exception, one looks to see whether the keys have been caused or allowed to remain in or on the car by a person who has moved away from them, no one else being left in charge of the keys.”
Gibson found that, on any ordinary use of language, the insured had left the ignition key in the car. The fact the insured had depended on the car being armed with an immobiliser might go to the reasonableness of the man's action but provided no help on the question of whether the keys were left in the car.
The theft was not comparable to hijacking as “no violence, or threat of violence, caused or attended the leaving of the key... (The insured) had caused the key to remain in the ignition when he moved 15 to 25 yards away from the car in circumstances in which he did not see the thief open the car door, get into the car, shut the door, lock the doors and start the engine before (the insured) was alerted by the engine noise to the fact that the theft was occurring”.
The Court of Appeal found that, as the claim was effectively excluded as a result of the insured having “left” the keys in the car, it was unnecessary to consider whether he had failed to take reasonable care of the insured property.
Thus, the observations of the first judge on the meaning of this requirement, which has limited the duty of the insured not to conduct himself recklessly, remain undisturbed and can probably be regarded as good law.
The insurer's determination not to allow this claim appears at last to have paid off. However, it will have incurred substantial costs both at trial and in pursuing the appeal. The case illustrates the need to draft policy terms and particularly exclusion clauses in the clearest possible terms to try and prevent similar disputes arising in the future.