Case Comment: Fallows v Harkers Transport (Royal and Sun Alliance, vehicle insurance)

Mr Fal­lows’ car was dam­aged by a vehi­cle owned by the defen­dants. Lia­bil­i­ty was not an issue. Mr. Fal­lows’ vehi­cle was insured by Roy­al and Sun Alliance, who sought to recov­er their costs from the defen­dan­t’s insur­ers. The costs were £1825.53. Not a large sum. How­ev­er, the defen­dants object­ed.

The rea­son for the objec­tion was that Roy­al and Sun Alliance arranged repair via a whol­ly-owned sub­sidiary, which then con­tract­ed with a sub­con­trac­tor, who actu­al­ly repaired the vehi­cle. The sub­con­trac­tor billed the sub­sidiary the sum of £1542.78. The sub­sidiary added on fur­ther costs, and billed Roy­al and Sun Alliance.

In Rom­ford Coun­ty Court, the defen­dants ques­tioned the sum claimed. It was held that, giv­en the duty to mit­i­gate, the best evi­dence of rea­son­able cost of repairs was that which RSA’s sub­sidiary nego­ti­at­ed with the sub­con­trac­tor. There was no evi­dence that RSA itself could only nego­ti­ate a high­er price. While admin­is­tra­tion costs have been allowed by the courts in the past, there are no deci­sions allow­ing them to a sub­ro­gat­ed insur­er, let alone a sub­ro­gat­ed insur­er’s sub­sidary. And in coun­ter­bal­ance, there are deci­sions where admin­is­tra­tion costs have been dis­al­lowed.

The Judge (Platt J) said:

Since RSAARL is whol­ly owned by RSA the effect of these extra charges if they are paid by defen­dants is sim­ply to boost RSA Group’s prof­its beyond the actu­al cost of repair by the mar­gins insert­ed by RSAARL. I can find no basis in law for say­ing that this is a course of action which a claimant insur­er is enti­tled to take [..]. On the evi­dence the defen­dant has clear­ly estab­lished a fail­ure to mit­i­gate on the part of the claimant.

Now that this judg­ment is pub­lic, the util­i­ty of this busi­ness arrange­ment to RSA is prob­a­bly moot. Oth­er insur­ers could use the same mod­el. This how­ev­er was found to be like­ly to lead to an increase in costs to the insured mem­bers of the pub­lic of some 25%.

RSA were held liable in costs to the defen­dant — exceed­ing­ly unusu­al in a small claim. Even though they were the claimant, they almost com­plete­ly failed to com­ply with pre–action pro­to­col and with the court–ordered dis­cov­ery process. For exam­ple, the exis­tence of a for­mal invoice from the repair­er to RSA’s sub­sidiary was not dis­closed, even once its exis­tence had become appar­ent dur­ing the tri­al.

Per­mis­sion was giv­en to appeal.

Judg­ment in the case can be found on BAILII at Fal­lows v. Hark­ers Trans­port (A Firm) [2011] EW Misc 16.