Judgment has been handed down in National Highways Ltd v EUI Limited t/a Admiral Insurance and others. Insurers arguments were dismissed and judgment awarded for the Claimant.
Our Senior Claims Handler, Oliver Burke, and Legal Director Chris Heitzman are the conducting solicitors for the Claimant, and have summarised the issues and the outcome.
‘The cap’
Insurers sought to argue that a claim for damage to a highway could never exceed what they called ‘the cap’ by which they meant the pre-accident value of the materials damaged. In other words, if a central reserve was taken out in an accident and the labour, plant and materials required to reinstate it cost say £20,000, the recovery against the responsible insurer would be capped at just the pre-accident value of the steel barrier, perhaps £500, leaving the public purse to bear the majority of the loss with the insurers only bearing the pre-accident material value.
The segment argument
Insurers then sought to argue that in the case of, for example, a crash barrier strike, the thing damaged was not the barrier but just the individual parts of the barrier which were damaged, so that the repair cost should be limited to the value of the segments damaged, rather than the cost of repairing the barrier.
The Court decided, “it is clear that subdivision of a damaged chattel into segments is a flawed exercise. The fundamental difficulty with the segment argument is that it seeks to characterise the beams of a crash barrier as if they were, for example, a fleet of cars. One beam in a warehouse may have the same legal character as one of the claimant’s highway maintenance cars. But 50 beams joined together and fixed to the highway do not have the same character as 50 separate highway maintenance cars. The beams have become part of one construction, one barrier, like bricks in a building.” The property damaged is the highway.
The measure of the loss is the reasonable cost of repair
Earlier cases, including those previously labelled by insurers ‘test cases’, which awarded the full reasonable cost of repair, not just the reduction in value of the materials damaged, were found to be correctly decided.
In each case the Court held that the quantum of damage is the notional reasonable cost of repairing the highway.
Quantum
The claims were found not to be excessive and so not reduced in terms of quantity of resource or rates charged for the resources used in the repairs. CECA rates, including the uplifts therein, were found to be reasonable, with no reduction.
Limiting disclosure in future cases
The Court wondered whether in future cases extensive disclosure as had been given in these test cases, would be reasonably required or proportionate: “I expect that in future cases, insurers including EUI Ltd may draw upon the extensive disclosure given in these test cases. In short, I do not think that they are now lacking in material from the claimant.”
The claimant’s contracts with its repairers
The Court also disapproved of the insurer’s initial case that the contracts between the asset owner and its repairers ought to be relevant, in that because the Claimant pays its contractors to some extent for maintenance in any event then the loss recoverable from an insurer is nil or minor: “In these direct loss claims for diminution in value, the court will not condone misconceived enquiries into who is paying for work or whether it is gratuitous […] [I]n the test cases the claimant’s maintenance and repair contracts are irrelevant.”
Discussion
The decision is unsurprising. A property owner whose property is damaged by a tortfeasor is generally entitled to the cost of putting right the damage. It was not attractive morally or in law to suggest that should somehow be capped to just the pre-accident material value, which would leave the innocent victim under-compensated for putting right the damage caused by the tortfeasor.
In holding that the loss is the reasonable cost of repair, the Court unsurprisingly has upheld a long line of caselaw in such cases along those lines.
The Court went beyond dismissing the insurers misconceived arguments on the measure of the loss and quantum by expressing a view that the contracts and disclosure ought not to be an involved exercise in future claims, the former usually being irrelevant, and the latter being addressed in this test cases so that insurers cannot in future complain they don’t have what they need to consider and pay valid claims.
Insurers will now have to pay the claims, plus the costs of the proceedings on both sides, including a three-day trial conducted by leading Counsel.
Contact our team today
If you’d like to speak with our experts about anything in the article above, or wish to enquire about how we could help your business with uninsured loss recovery, please call us free on 03300 945 100.
Author: Chris Heitzman & Oliver Burke