Motor Insurance - Coles v Hetherton & Ors (Court of Appeal)
20 December 2013 20 December 2013
UK & Europe
Court of Appeal decides whether claimant insurer could fully recover the cost of repairs from the defendant insurers
The claimant drivers' cars had been damaged by the defendants. The claimants' insurers brought subrogated claims against the defendants' insurers. The claimants had all elected to use their insurers' system for repairing cars (which was cheaper than the open market value for the repairs). The defendants' insurers argued that the measure of the claimant's loss (where a car was not written off) should be the (lower) cost of repair actually incurred rather than the reasonable cost of repairs which the claimants' insurers were seeking. That argument was rejected at first instance and the Court of Appeal has now dismissed the appeal from that decision.
The Court of Appeal held that it was wrong to argue that the claimants must mitigate their loss by having repairs done at a lower cost. Mitigation is not relevant to this "direct" loss. The loss to a claimant whose chattel has been damaged by the negligence of another is immediate. That loss cannot be mitigated by having the chattel repaired free or for a lower cost. The claimants' loss is the diminution in value of the chattel and not the cost of the repairs. Accordingly, the claimants were entitled to the "reasonable cost of repair", which was a question of fact for the trial judge to determine. Nor did it make any difference that the claimants' insurers could obtain the repairs at a lower cost. In a subrogation claim, the cause of action remains that of the insured so the issue is what cost of repair a person in the insured's position could obtain on the open market. Furthermore, where a loss is covered by insurance, the benefits obtained under the insurance are irrelevant in assessing the correct measure of damages which are recoverable.
The Court of Appeal went on to hold that the claimants' insurers could also recover "administrative costs" and "sundry services", provided the overall repair cost claimed from the defendants was reasonable. If it was, each item actually charged to the claimants' insurers by the repairers did not have to be reasonable. However, the position of the cost of a courtesy car was different. The right to a replacement car was a contractual benefit under the claimants' insurance policy and was not a part of the cost of repairs. However, the reasonable cost of a courtesy car was recoverable by the claimants (which sum they would hold for the benefit of their insurers).