List members may be interested in a recent decision of Cooke J in the English High Court: Coles v Hetherton [2012] EWHC 1599.

http://www.bailii.org/ew/cases/EWHC/Comm/2012/1599.html

The judgment is the latest in the ‘saecular war’ (according to Aikens LJ in Pattni) between insurance companies over mitigation in car accident cases. Nevertheless, the principles applicable to the assessment of damages were expressed in quite general terms.

The facts are an everyday occurrence: the defendant negligently collides with the claimant’s car, causing physical damage; the car needs to be repaired. In each of the managed cases in Coles, the claimant was insured by Royal Sun Alliance. RSA arranged for the cars to be repaired by another company that formed part of the same corporate group. The repair company was able – presumably through economies of scale – to procure repairs at a lower cost than the individual would have been able to obtain from their local garage; nevertheless, they charged the claimants at the going rate for individuals.

 

Three preliminary questions were asked and answered as follows:

 

(1)   Measure of loss: Where a vehicle is negligently damaged and is reasonably repaired (rather than written off), is the measure of the claimant’s loss taken as the reasonable cost of repair?

 

Cooke J held (at [27]-[32]) that the claimants were entitled to damages measured by the reasonable cost of repair, even if the actual costs were lower (or indeed, even if the claimant chose not to seek any repair at all). He rejected the defendant’s contention that the actual cost of repairs operated as a ‘cap’ on the maximum amount that the claimant could recover.

 

He referred to a long line of authority concerning physical damage to ships (The Endeavour; The Glenfinlas; The Kingsway; The London Corporation), and the House of Lords decision in Jones v Stroud, which concerned repairs to a house required as the result of a negligent survey. He also referred to obiter comments of the House of Lords and Court of Appeal in other car accident cases (Dimond v Lovell; Burdis v Livsey).

 

(2)   Test of ‘reasonable repair charge’: If a claimant’s insurer has arranged repair, is the reasonableness of the repair charge to be judged by reference to (a) what a person in the position of the claimant could obtain on the open market; or (b) what his or her insurer could obtain on the open market?

 

The defendants argued that the reasonableness of the repair charge should be judged by reference to the repair options available to RSA (the insurer). The amounts charged by RSA’s repair company were higher than RSA could have negotiated in the open market, albeit they were no higher than the costs that would have been borne by individual claimants acting independently.

 

Cooke J held (at [51]) that ‘the defendants’ argument conflates the insurer and the insured…’ because as a matter of principle, the loss is suffered by the policyholder. He concluded (at [61]) 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.’

 

(3)   Recoverable amount: Where a vehicle is not a write-off and an insurer indemnifies the insured by having repairs performed and paying charges for those repairs, and where the amount claimed is no more than the reasonable cost of repair (on the correct legal test determined under (2) above), is that amount recoverable?

It was canvassed that some of the claims might have included charges other than for the direct costs of repair e.g. for collecting the damaged car, or the provision of a courtesy car. Although he did not need to finally decide the issue, Cooke J noted (at [63]) that ‘It seems to me that there is a material distinction, as drawn in the authorities, between a claim for diminution in value of the asset as reflected in the reasonable costs of repair payable by the individual claimant on the one hand and a claim for loss of use of the vehicle as reflected in a claim for a replacement car on the other.’ He derived this distinction (at [24]-[26]) from the decision of Aldous LJ in Burdis v Livsey.

 

Personally I think that Cooke J got it spot on, at least insofar as he was addressing general principles of mitigation in physical damage claims. I have reservations about the distinction that he sought to draw between physical damage and loss of use claims, but those issues did not arise directly, on this occasion. Unfortunately the car accident cases are a tricky test ground for working out general principles in damages, because lurking not too far below the surface of most judgments seems to be the fear that increased liability eventually means increased insurance premiums for all motorists.

Cooke J said that he anticipated an application for permission to appeal by the defendants. Provident and Allianz (the two insurers standing behind the defendants in Coles) have already indicated their disappointment in no uncertain terms: http://www.postonline.co.uk/post/news/2184738/rsa-wins-subrogation-costs-allianz-fears-motor-premium-hike

A decision by the Court of Appeal seems highly likely…

 

Best wishes,

Andrew