Coles v Heatherton Judgment

These cases are both of topical interest, in the light of recent media interest as to the functioning of Motor Insurance, and of general significance in restating the principles for the assessment of damages in tort actions and the irrelevance of insurance arrangements.

Cooke J was asked to determine three preliminary issues in 13 cases which are being managed together in the Commercial Court. They all involve the arrangements made by Royal & Sun Alliance (“RSA”) for having vehicles repaired when its policyholders are involved in an accident in which the other driver is at fault. Under these arrangements another company in the RSA group, MRNM, is contractually responsible for all repairs, and bills RSA at rates which are designed to equate with those which would be charged to a retail customer. This is the amount which is claimed from the tortfeasor, where another party was at fault for the accident. This sum may be higher than the sum which MRNM pays to another garage in respect of the repair work, which will often reflect wholesale rates and discounts for bulk.

These arrangements have been challenged by a number of other insurers. Cooke J, however, resolved the preliminary issues in favour of the RSA policyholders. He held:

(1) That where a vehicle is damaged, the measure of damages is the diminution in value of the chattel, which is taken as the reasonable cost of repairs. The reasonable cost of repairs is not necessarily the repair cost actually incurred, and can be proved by any evidence sufficient to discharge the burden on the claimant of establishing the relevant amount.
(2) The tortfeasor is not able to rely on the arrangements made by the claimants’ insurer (here RSA) in providing an indemnity by having the car repaired. Accordingly it is not open to the tortfeasor to contend that it is the cost to the insurer which has to be taken as the measure of loss, nor that the arrangements made by RSA were a failure to mitigate the loss or were the cause of part of the loss. The relevant question is whether the amount claimed by the claimant does or does not represent the reasonable cost of repairs to him, without reference to his insurer.

Christopher Butcher QC appeared for the RSA policyholders.

To view the full judgment click here.

Date added: June 25th, 2012

Area of Expertise

Commercial Litigation
Insurance & Reinsurance