He realized 'honesty is the best policy' and told them what really happened to their car.
I make it a 'policy' not to lend my friends money. [=I don't lend my friends money]
Property damage caused by fire is not covered under this 'policy'.
(..) Harry... What do we do, Harry? Madam Lestrange, would you mind presenting your wand? And why should I do that? It's the bank's policy! I'm sure you understand, given current climate. No! I most certainly do not understand! I'm afraid, I must insist. Very well, Madam Lestrange. (..)2011 Harry Potter and the Deathly Hallows: Part 2