Dr Nicholas Bevan

Dr Nicholas Bevan

Tuesday, 18 February 2014


Coles and others v Hetherton and others [2013] EWCA Civ 1704

The facts: two insurers decided to challenge the level of accident damage incurred in 13 test cases.  In each case the claimants’ were insured by Royal and Sun Alliance Insurance Plc (RSAI) and under the terms of their insurance policy, RSAI arranged for and indemnified the cost of repairing their vehicles. The repairs were undertaken by a wholly owned subsidiary of RSAI trading as MRNM.  MRNM sub contracted some of its repairs to independent garages and due to the scale of this business it secured a discounted price from these businesses.  The cost of repairs claimed by RSAI were higher than the actual amount invoiced to it by MRNM, producing a discrete profit. However the overall claim for repair costs were no higher what an individual claimants would have incurred had they instructed the garages themselves (without the bulk discount). D contended, inter alia, that RSAI’s mark up on their repair costs should not be recoverable as damages and that the proper rate should be the lower cost to RSAI of the repairs on the open market. The issue was referred for trial as a preliminary issue.  Mr Justice Cooke found for the claimants and held that the charges were recoverable.

The decision: The Court of Appeal confirmed that the proper measure of compensation for tortious damage to property is the diminution in its market value. Where the property is repairable, this equates to the reasonable cost of repair. It matters not whether the repairs are actually undertaken or even paid for, nor whether they are undertaken free of charge: the damages are assessed by reference to the open market repair cost; be it for a car, house or a vessel. Accordingly, the doctrine of mitigation has no application to the assessment of this loss. The court is not concerned with whether the claimant’s insurers made a profit on the repairs.

Comment: It is worth noting that the Office of Fair Trading referred this practice to the Competition Commission last year and described this practice as ‘dysfunctional’ at a time of escalating insurance premiums.  The Competition Commission then published an interim report in December 2013 that found various aspects of this practice anti-competitive and it is now in further discussions with the motor insurance industry.

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