Royal and Sun Alliance Insurance — where does this ultimately lead?

My gut instinct regard­ing my last post on Royal and Sun Alli­ance Insurance’s busi­ness struc­ture increas­ing the costs of acci­dent repair was that it was unlikely to be the end of the mat­ter. Per­mis­sion had been gran­ted to appeal; I fully expec­ted to see the mat­ter be resolved there. But that would only determ­ine the law as it applied to the fac­tual mat­rix of the case in ques­tion. That approach would be unlikely to help other cases much — it would be open to argue that the fac­tual mat­rix was suf­fi­ciently dif­fer­ent that the appeal judg­ment did not apply. This clearly would not address the core question.

Provid­ent Insur­ance has decided though to take a dif­fer­ent approach: to seek determ­in­a­tion from the Com­mer­cial Court — a spe­cial­ist branch of the Queen’s Bench Divi­sion of the High Court — as to whether RSAI’s com­mer­cial model is leg­ally cor­rect. In the case I last wrote about, it was held (at County Court level) that it was not, but clearly there has been a dif­fer­ence of opin­ion between County Courts. RSAI has agreed that it’s desir­able that its busi­ness prac­tice in ques­tion be tested for legality.

So in Coles & Ors v Heth­er­ton & Ors [2011] EWCH 2405 (Comm) Provid­ent and RSAI have both brought claims between them­selves in the High Court itself (nor­mally they are pre­cluded from doing so because of the likely size of award), and trans­ferred in cases from the County Courts. The next step will be the selec­tion of lead cases in this matter.

This is all at a very early stage, but it has poten­tially far–reaching effects. The lead cases will determ­ine the shape of the case as it will be heard, but there are more situ­ations than just vehicle repair paid by an insurer where a corporation’s internal group struc­ture can lead to addi­tional costs being passed to the per­son who ulti­mately pays. In the case pre­vi­ously men­tioned it was entirely unclear why addi­tional costs were levied by the inter­me­di­ate insurer–owned com­pany, and this is why some County Courts have rejec­ted such addi­tional costs.

How­ever, there could be poten­tial situ­ations where such addi­tional char­ging was trans­par­ent, and also neces­sit­ated by a busi­ness struc­ture chosen for legit­im­ate other reas­ons, for example tax min­im­isa­tion. Whether increas­ing the cost to the end con­sumer in order to achieve an unre­lated advant­age­ous fin­an­cial out­come for the com­pany as a whole is the ulti­mate ques­tion here, and one that is very inter­est­ing indeed.