Claim and negotiation principles

It happens every day. The owner's vehicle is damaged in an accident, caused by the negligence of the driver of the other car, the tortfeasor. The vehicle is repairable, not a write-off. The owner reports the accident to his insurer, repairs are arranged and carried out, whilst meanwhile a courtesy car is provided. The owner's insurer then seeks indemnity from the negligent driver's insurer. The matter is negotiated and settled, and on we go.

Most of us pay our motor insurance premiums, which cover the damage, including for the uninsured. The owner of the damaged vehicle will usually get the repairs carried out by his own garage or by a garage approved by the insurers. If the owner arranges the repair directly the cost will be £x. If the insurer arranges the repair the cost will often involve a discount, the insurer using his bargaining power; but in claiming indemnity from the negligent driver's insurer there will be a 'mark-up' to cover administration expenses.

What is the measure of damages recoverable for the damage to the vehicle? The short and simple answer is the diminution in the value of the vehicle at the time of the accident in terms of market value. It was worth £7,000, now it's worth £5,000. In practice the reasonable cost of the repair obtainable by an ordinary person is taken as a good indication of the diminution in value. So any increase or decrease in repair costs so far as the involvement of an insurer is concerned is irrelevant. No account is to be taken of any insurance discounts and of any administrative costs.

In addition to the direct loss occasioned by the accident, the owner is entitled to damages for loss of use for such time as it takes reasonably to carry out the repair, so £y a day or the courtesy car, a comparable vehicle. If under his policy the owner gets a 'free' courtesy car he is still entitled to £y a day, because he has bought the courtesy car with his premium, and the tortfeasor ought not to be able to benefit from this.

One might have thought that all these legal propositions were well settled and acted upon in the insurance world. Indeed, the law has been clear for many years. But for the avoidance of doubt a restatement by the Court of Appeal may not come amiss in Coles v Hetherton [2013] EWCA Civ 1704, [2015] 1 WLR 160. The principles for claim and negotiation are clear.