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Tuesday, 19 June 2012

Insurer's own repairer's charges may be reasonable

In Coles & Ors v Hetherton & Ors [2012] EWHC 1599 (Comm) (15 June 2012)  the High Court (Cooke J) ruled that what was essentially Royal Sun Alliance's claim against two other insurance companies, in which RSA's use of its own repair facilities to fix its insureds' cars at the expense of the "at-fault" drivers who were insured by the other companies involved, was challenged. The case concerned three preliminary questions which had arisen at the case management conference stage of the proceedings, concerning the measure of loss (is it the reasonable cost of repair?), the test for a reasonable repair charge, and the recoverable amount (which seem very closely interconnected).

The judge took the view, after a long hard look at the precedents, that the measure of loss was indeed the reasonable cost of repair, and then (the most important point in the judgment) that the reasonableness of the costs was to be considered in the context of the arrangements made by the insured:
The reasonableness of the repair charge, as a measure of the diminution in the value of the damaged car, is to be assessed by reference to the position of the individual claimant, without reference to his insurers or to any benefits which he obtains under his insurance policy, for which he has paid premium. The well known and well established principles of insurance, as set out in the authorities to which I have referred, mean that the claimants' dealings with their insurers and the insurers' actions in relation to the indemnity granted are res inter alios acta, in the context of assessment of diminution in market value or costs of repair and behind the curtain for any tortfeasor who seeks to argue about mitigation of loss in payment of repair costs.
The charges made by RSA's repairer were therefore not inherently unreasonable, notwithstanding the relationship between the insurer and the repairer. And there are sound legal reasons for saying so, but they have to be considered - for wider purposes, not for the purposes of the case - in the context of other things happening in the motor insurance market, and in particular the OFT's reference to the Competition Commission in which competition in the industry is referred to, very un-legalistically, as "dysfunctional". (See my earlier post, OFT to refer car insurance market to Competition Commission.)

The third question, incidentally, was left for another day and another hearing as it features in an application for summary judgment.

The Daily Telegraph ("read by the people who remember the country as it used to be", as the rubric on the front cover of the late Prof Fred Hirsch's and David Gordon's excellent little book, Newspaper Money (Hutchinson, 1975, the year in which the unfortunate Prof started trying to teach me)*) reports in its customary balanced and thoughtful way that this could mean a 25 per cent hike in premiums. That is not a matter for the High Court in this action, but I hope it will be of considerable interest to the Competition Commission.

*In full (because it deserves to be read, dated as it is - though it has aged less than one might have expected):
"The Times is read by the people who run the country.
"The Guardian is read by the people who would like to run the country.
"The Financial Times is read by the people who own the country. [And me - ed.]
"The Daily Telegraph is read by the people who remember the country as it used to be.
"The Daily Express is read by the people who think the country still is like that.
"The Daily Mail is read by the wives of the men who run the country. [Editor's note: Margaret Thatcher had only just become leader of the Conservative Party. Her first cabinet, the first in many years to which the the Prime Minister did not appoint a woman, was five years in the future.]
"The Daily Mirror (which itself once tried to run the country) is read by the people who think they run the country.
"The Morning Star is read by the people who would like another country to run the country.
"The Sun - well, Murdoch has found a gap in the market - the oldest gap in the world."
Attributed to an anonymous advertising copywriter.

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