Today Mr Justice Cooke has given judgment on preliminary issues in Coles v Hetherton, at the heart of which lies a challenge to the RSA repair model.
The RSA repair model has been the subject of many County Court proceedings and previous media comment.
This judgment has been much anticipated given the concerns over motor premium inflation. That concern has been the subject of an OFT inquiry into activities within the insurance market.
The Decision
On two preliminary issues, the judge ruled that:
1. the measure of loss in a case where the damaged vehicle has been repaired is the reasonable cost of repair, but that “is not necessarily the repair cost actually incurred…”
2. the cost of repairs should be determined by reference to what an individual would pay for repairs if they arranged them personally, even if the repairs were in fact arranged and paid for by the insurer.
Allianz Insurance is one of the insurers involved in the litigation, contesting the right of RSAI to recover more than the actual cost of repairs. Martin Saunders, Head of Technical Claims, Allianz Insurance said:
“The person on the street who pays their motor insurance premium will be bewildered by this.”
He added:
“The problem is that no insurer can operate in a vacuum at a competitive disadvantage and survive because the commercial environment in which we operate is too challenging. If this decision stands we can expect the rest of the market to feel forced to move in the same direction as RSA which we estimate will add up to approximately 25% on to motor insurance repair bills which will ultimately impact significantly on premiums.
“Additionally we can expect to see a far higher volume of County Court litigation as insurers challenge “notional reasonable repair costs to policyholders” presented on evidence such as engineer’s reports.
“I fear that this judgment will exacerbate the issues that the OFT is seeking to address by adding a further and new layer of “dysfunctional” competition. In my view that cannot be allowed to happen. For our part we welcome the OFT’s intervention and referral to the Competition Commission, and we fully intend to appeal this decision.”
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