Firms in talks about joint move following court ruling condemning RSA subrogation
A phalanx of leading motor insurers are holding talks on mounting a class action against RSA for inflating repair costs.
Insurance Times has learnt that the claims heads of Ageas, Allianz, AXA, Equity Red Star, Groupama, NFU Mutual, QBE and Zurich have been holding talks about conducting a joint action against RSA over its subrogation arrangements, which emerged as the subject of a damning court ruling last week.
The insurers are being advised by solicitors Beachcroft.
In the wake of the Romford County Court judgment, in which Judge Platt found that RSA had fabricated add-on charges, the company has said that it has suspended all of the court actions it has taken against other insurers for refusing to make the controversial payments.
Insurance Times has also learnt that RSA’s UK chief executive Adrian Brown has contacted his counterparts at other insurers in a bid to resolve the tidal wave of outstanding legal actions triggered by their refusal to pay the add-ons.
In addition to the mooted joint action, a number of cases against RSA are due to be heard in the Commercial Court, a division of the High Court.
Judge Platt, sitting at Romford County Court, threw out a claim by RSA customer Kevin Fallows to recover a £1,825 repair bill from Hawker Transport, whose insurer Equity Red Star had refused to pay.
The case centred on RSA’s use of a wholly owned subsidiary company RSA Accident Repairs Ltd (RSAARL), which arranges repairs for its non-fault customers.
The judge found that the subsidiary had charged the defendant’s insurer not only the costs charged by the sub-contracted vehicle repairer but add-on sums.
The judge described the add-on charges as a “fabrication” and “simply a fiction invented by RSAARL”.
He found that if RSA’s subrogation model was adopted by the rest of the market, the cost of minor motor repair claims would be inflated by 25%.<br /><br />He said: “The effect of the arrangement that RSA has sought to implement is at best to pass on to the defendant’s insurers some part of the administration expenses incurred by RSA in dealing with the claim, thereby inflating the total repair costs. Other and less innocent explanations are not necessarily to be rejected out of hand.”
Judge Platt said the charges were designed “simply to boost RSA Group’s profits”.
A spokesman for the company said: “RSA takes very seriously any suggestion that it has acted inappropriately, and strongly refutes any suggestion that it has acted so.”
He said that RSA’s subrogation arrangements were legal and had no comment to make on Brown’s attempts to broker a deal with other insurers.
To head off further county court litigation, RSA has initiated a test case in the High Court.