0370 270 6000

already registered?

Please sign in with your existing account details.

need to register?

Register to access exclusive content, sign up to receive our updates and personalise your experience on brownejacobson.com.

Privacy statement - Terms and conditions

(RSA Test Cases) Coles, Woodhead, Crowther v Heatherton, Guy, Thomas, High Court (Commercial Court), 15 June 2012

22 June 2012
The issues

RSA Insurance – measure of loss, reasonable repair charge, recoverable amount.

The facts

13 actions were the subject of combined case management because of the issues of principal involved. Each of the cases arose from a minor road traffic accident in which the vehicle of a person insured by Royal and Sun Alliance Insurance Plc (RSAI) was damaged by the admitted negligence of a driver insured by either Provident Insurance Plc or Allianz Insurance Plc. In each case RSAI indemnified its policyholder by having the vehicle repaired. The claims are therefore subrogated claims brought in the name of the policyholders.

Insurers are already concerned that, unless this decision is overturned, insurers will have no option but to follow the RSA model of inflating claims to stay in the market

RSAI engaged MRNM, which is the trading name of RSA Accident Repairs Ltd, a member of the RSA group, to undertake repairs to the claimant’s vehicles. MRNM owns and operates six repair garages which are staffed by its own employees; these are known as quality repair centres. MRNM also sub-contacts other repair jobs to independent garages outside of the RSA group which then do the repair work. MRNM undertakes the repairs under the terms of a services agreement which lays down rates and charges for repair services. Schedule 3 to the agreement provides for labour and other charges to follow a set formula which allows for MRNM to make a profit over and above the charges paid by it to repairers. Bordereaux moved from the repairing garages to MRNM and from MRNM to RSAI with its mark up, and payment proceeded down the chain in the same fashion. When RSAI presented a claim to the insurance company of a tortfeasor, a breakdown of invoice charges was put forward as the basis of the claim. This set out the figures payable by RSAI to MRNM which in most cases exceeded the sums paid by MRNM to a sub-contractor as the rate agreed with the repairing garages were, on RSAI’s evidence, lower than those which could have been obtained by any individual obtaining repairs from the same garage because of the discount which MRNM could obtain from the garage by reason of its bargaining power and the bulk volume of work produced to the garage by it.

RSAI maintained that the figures charged by MRNM to it were no more than any individual policyholder would have had to pay a garage had they gone individually in to the market. Provident and Allianz calculated that the overall effect of the inter-position of MRNM between RSAI and the repairing garage was to increase the cost of the work done by approximately 25%.

RSAI’s case was that the claim presented on the breakdown of invoice charges properly represented a loss sustained by the policyholder which he or she was entitled to claim from the tortfeasor because it reflected what the policyholder would have had to pay individually for such repairs. It prays in aid the retail charge guide published by the Auto Body Professionals Club which is a motor repairer trade body which gives a guide as to the recommended retail price for repairs. RSAI accepted that the model described generated income for MRNM. RSAI indicates that other insurers, when presenting claims to tortfeasors insurers made claims for sums invoiced gross to them however it was the defendant’s suggestion that in some cases MRNM imposed charges even where no service was provided by the garage at all – an allegation which was hotly disputed. Insurers however have taken objection to the RSAI model because of the substantial mark up on the repair charges.

The decision

Decision 1
The court took account of various early shipping cases including the Endeavour (1890) in which it was accepted that the cost of repairs was the measure of damages recoverable. It made no difference if “somebody out of kindness were to repair the injury and make no charge for it”. The wrongdoer would still be bound to pay the cost of repairs as the measure of loss suffered from diminution in the value of the asset. In the Glenfinlas (1918) temporary repairs were made to a vessel following a collision but permanent repairs were postponed until the end of the First World War. In 1917 however the vessel struck a mine and sank. The cost of the permanent repairs were however accepted it being clear law that the owner of a vessel was entitled to the cost of repairs. The court were also mindful of the Court of Appeal decision in the London Corporation (1938) in which cost of repair was the cost of diminution in the value of the ship even though the vessel had been sold for break up before repairs had been done. The court were mindful that these principals were of longstanding and had been more recently reaffirmed by the Court of Appeal and the House of Lords. In Jones v Stroud District Council (1986) a claim for negligence against a local authority for failing properly to inspect the foundations of a house gave rise to recovery of cost of repair though it was not established that such costs had ever been paid. It is clear from the previous authorities that there is no need for the repair to have been done let alone paid for.

Issues of mitigation cannot apply to the court’s assessment of the direct loss where it uses the reasonable cost of repair as a way of assessing the diminution in market value of the car.

That reasonable cost is not necessarily the repair cost actually incurred, whether by the claimant or its insurer or indeed by anyone else who pays a repairer since the reasonable cost of repair is only a way of ascertaining the diminution in the value of the chattel by reason of the physical damage so it is the normal and conventional way. The court can assess the reasonable cost of repair by reference to any evidence which is sufficient to discharge the burden of proof on the claimant to establish the amount in question. Whilst this would ordinarily be achieved by producing invoices for repair costs this need not necessarily be the case since estimates for future repairs may be sufficient as might surveyors/ engineers or other expert reports whether by reference to photographs, reports of damage and tables of rates for labour charges, parts and paint or otherwise. In each case it will be a matter for the court to determine whether the claimant had made out its case whether or not repairs had been done and whether or not an invoice is produced for the repair costs.

Decision 2
Turning to the second question, RSAI contended that the reasonable repair charge was what a person in the position of a claimant could obtain on the open market.

The defendants submitted that the reasonableness of the repair charges to be judged by reference to the lower cost RSAI could obtain in the open market.

The problem for the defendants was that RSAI procure the repairs as part of their obligation to indemnify the Policyholder under the insurances. The authority that they had to effect repairs arose from the insurance policy terms themselves and the options exercised under those terms. Despite the defendant’s protestations to the contrary, the submission required the tortfeasor to have access to the claimant’s insurance arrangement in order to pray in aid the options available to RSAI to reduce the cost of repairs. The defendants arguments conflated the insurer and the insured. The defendants argument fell foul of the decision of the Court of Appeal in Bee v Jenson (No 2) (2008) in which Morrison J held that the court was not concerned to know whether the insurer made a profit or not. The insurer’s position was not to be conflated with the claimants as the law remained blind to the insurance. This decision was upheld by the Court of Appeal where Longmore LJ stressed the irrelevance of the insurance in assessing the claimant’s loss and stated that the absence of any liability on the part of the claimant to pay for the hire of the car, because of that insurance, made no difference to his entitlement to claim the reasonable cost of a hired car. The defendants relied on Copley v Lawn (2009) where the Court of Appeal upheld a decision of a mercantile court judge whom the court treated as conflating the position of insurers with their solicitors, brokers or insurers in two cases where advice was sought by the insured. That however was a far cry from the present case where the issue is whether to attribute decisions about repairers and cost of repairs made by the insurer, without reference to, or the knowledge, of the insured. The claimant’s position could not therefore be conflated with that or the RSAI. The consequences of the defendants argument would indeed, as the claimant’s admitted, be far reaching because, if correct, it would be open to the tortfeasor in every reinstatement case to investigate whether the insurer could have come to some arrangement which was less damaging to the tortfeasor.

The defendant’s argued that the increase in cost of repair resulted from RSAI’s decision to instruct MRNM, not from the accident and that that decision amounted to a new and intervening cause which broke the chain of causation. The court disagreed. There could be no intervening cause constituted by any decision of the RSAI to utilise MRNM under the scheme which had in any event already been set up prior to the collision in question. To the extent that foreseeability was relevant, the diminution in value and the need for repair to restore that value obviously was foreseeable. The court was not concerned with the arrangements made by the insurers for repair save in so far as there was reliance thereon as evidence of the reasonable costs of repairs. The profitability or otherwise of the insurance was not a matter for the court. In the court’s judgment therefore the answer to the second question was (a). The diminution in the value of the damaged car was to be assessed by reference to the position of the individual claimant without reference to his insurers or any benefits which he obtained under his insurance policy for which he has paid a premium. It was neither here nor there whether the insurers put in place a repair company such as MRNM which sub-contracts to repair garages or whether they sub-contract further to specialist repairers.

Decision 3
The court was asked to refrain from answering that question because it was interconnected with an application by the claimant’s to strike out various paragraphs of the defendant’s statement of case and/ or an application for summary judgment.

The court did however comment on a point taken by Provident/ Allianz in relation to the way in which RSAI pleaded its cases in the County Court. In each case before the court, the claimants sought ‘damages arising out of a road accident’. The pleading went on to give particulars of financial losses specified as ‘vehicle repairs’ and ‘incidental expenses’. The claims were not framed as claims for diminution in value of the cars by reference to the commercial cost of repair but as claims for damages in respect of financial losses. The court considered that this did not affect the answers to questions 1 and 2 since amendment of the claim forms would be hard to resist in the absence of any prejudice to the defendants. The formulation of the individual claim forms however was said not to sit happily with the thrust of RSAI’s argument. The claim form may well have given the appearance that all that was claimed by way of damages was the actual cost of repairs paid to an arms length repairer.


It is clear that this decision will go to appeal. Whilst the decision, on a strict review of the previous case law, can perhaps be rationalised, it does seem a very odd decision in light of the decision of the Office of Fair Trading to refer the ‘dysfunctional motor market’ to the competition commission. Insurers are already concerned that, unless this decision is overturned, insurers will have no option but to follow the RSA model of inflating claims to stay in the market.

If the measure of damage is the notional reasonable repair cost to an individual, this may have knock on effects on credit hire where the notional hire rate is measured by spot rates. The Court of Appeal, whilst troubled with His Honour Judge Harris’ decision in Copley v Lawn, have indicated that the issue of the measure of loss does needs to be considered and this may therefore be an opportunity for the issue to be considered further. In the meantime, if the measure of the loss is the notional reasonable repair cost, defendants are likely to need to adduce evidence as to that notional cost by way of repair estimates or expert reports, which in itself is likely to drive up the cost of litigation.

focus on...

Legal updates

Non-payment of insurance premiums during the Coronavirus pandemic

The forced closure of many businesses as a result of the Coronavirus pandemic has had a huge impact on the nation’s Gross Domestic Product (GDP). Recent reports from the Office for National Statistics state that the economy was 25% smaller in April than it was in February this year.


Legal updates

Reinstatement for property damage losses – when does it apply?

The Court of Appeal has recently considered the correct test for measuring the indemnity for property damage losses and has provided useful guidance on whether an insured needs to intend to reinstate the property to its pre-loss condition.


Legal updates

Coronavirus (COVID-19) insurance considerations

With instances of COVID-19 rapidly increasing throughout the UK, many businesses are considering the options available to limit staff and customer exposure to Coronavirus.


Legal updates

Financial Services – ‘Duty of Care’ Bill: consumer protection or damp squib?

The Financial Services Duty of Care Bill (the “Bill”) was introduced into the House of Lords in October 2019 and had its second reading on 9 January 2020.


The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

mailing list sign up

Select which mailings you would like to receive from us.

Sign up