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.

1 thought on “Case Comment: Fallows v Harkers Transport (Royal and Sun Alliance, vehicle insurance)”

  1. Inter­est­ing. I’ve actu­ally been recently deal­ing with an insur­ance claim again­st my Fiesta where the oth­er party was at fault and where the repairs were made by a firm sub­con­trac­ted by their insur­ance. In this instance it doesn’t look like any­body pushed back again­st the final sum (which was in the hun­dreds, I thought) but there was always the pos­sib­il­ity.

    Frankly, for small sums, I prefer to avoid hav­ing to deal with insurers pre­cisely because of scen­ari­os like this.

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