A motorist whose car was stolen when he left the keys in the ignition while he was in a shop has received the backing of the financial services ombudsman in his claim for loss. Michael Faulkner explains the adjudication

It is becoming increasingly common for motor insurance policies to exclude losses arising from theft while the keys have been left in or on the vehicle. But many policyholders are shocked by the existence of this term when it comes to making a claim. They are even more shocked when the claim is turned down when they feel they have not been unreasonably careless.

Policyholders can, however, take comfort from a recent decision of the financial services ombudsman. This provides a clear demonstration of the robust approach that is currently being taken in relation to these clauses.

In the case, a motorist parked his car, an average family saloon, immediately outside a village shop to buy some cigarettes. He turned off the engine, left the car and shut the door, leaving the keys in the ignition.

He was served immediately, and as he was leaving he saw someone opening the driver's door and getting into the car. He tried to stop the thief driving off, but failed.

He subsequently made a claim under his insurance policy. This was rejected on the basis that losses arising from thefts where the keys had been left in the vehicle were excluded.

He referred the matter to the financial services ombudsman, where the adjudicator turned down the claim, because he said the motorist was unable to keep his car under observation for the entire time that he was in the shop.

Reversed decision
The adjudicator argued that, even though the shop was glass-fronted, so permitting a view of the vehicle, and the motorist was in the shop for only 15 or 20 seconds, there would have been a few seconds when the motorist was concentrating on the shopkeeper and would not have been able to see a thief approach the vehicle.

The matter was referred to the principal ombudsman, who reversed the adjudicator's decision. In his provisional decision, the principal ombudsman concluded that the motorist was sufficiently close to make a theft unlikely and therefore the insurance company's reliance on the exclusion was inappropriate.

A decisive factor was the design of the shop: it was glass-fronted and gave the motorist a good opportunity to keep his car under observation. It was also important that he could reach the car to try to stop the theft, although he failed. Furthermore, the car was low in value and the street was quiet.

Legal argument
The insurance company disagreed with the provisional decision, arguing that it was unfair to other policyholders who had previously accepted the rejection of their claims for breach of the exclusion. It also put forward a legal argument based on the recent decision of the Court of Appeal in Hayward v Norwich Union Insurance [2001] in which the interpretation of a similar exclusion clause was discussed.

In Hayward, the claimant stopped at a petrol station to fill up with petrol, and left the keys in his Porsche while he went to the kiosk to pay. He was 15 - 25 yards away from his car, which was in his field of view throughout, and he was absent for only a few moments. Although he did not see the thief enter the car, he was alerted by the engine noise and was able to get within touching distance of the car before it drove off. In fact, he had time to confront the thief.

The Court of Appeal said that the correct approach was to consider the ordinary meaning of the words "have been left" and ask whether the keys had been caused or allowed to remain in the car, and whether the person was close enough to make a theft unlikely.

On the facts the Court of Appeal held that Hayward had moved too far from the keys to make the prevention of a theft likely; and that on any ordinary use of language the keys had been left in the car.

The principal ombudsman concluded that the test he applied was consistent with that propounded in Hayward. However, he was not minded to apply the test as strictly as had the Court of Appeal. In his view, such an interpretation was potentially onerous, and it was his duty to consider what was fair and reasonable in the circumstances. He therefore upheld his provisional decision on this point, arguing:

"All policyholders may suffer from occasional lapses of attention and not take the care that they perhaps should in securing their vehicle.

"Obviously at some point such behaviour may amount to a lack of reasonable care and insurers will not meet such claims. In other circumstances, however, policyholders will feel understandably aggrieved if a claim is not met following a momentary lapse of attention."

The principal ombudsman then went on to criticise the manner in which the insurance company had drawn the exclusion clause to the motorist's attention, the clause being referred to only in a renewal document.

Finally, the principal ombudsman addressed the argument that the provisional decision was unfair to customers in a similar position.

While he was not prepared to comment on other cases, he stated: "If I were presented with the same circumstances I would again make the same decision."

What in my view makes this an important decision is the treatment of the Hayward decision. The principal ombudsman refused to be limited by the Court of Appeal's approach to the exclusion, and instead took a broader view of the issues.

While disputes surrounding the operation of keys in cars clauses will continue to arise, this decision will provide strong ammunition for policyholders who may feel that their claims have been unreasonably rejected.