Royal and SunAlliance (R&SA) is being sued for damages after allegedly reneging on a deal to settle motoring claims of more than £11m.

Helphire Group, which provides hire cars and repairs for victims of road crashes, claims R&SA has not kept to an agreement made earlier this year.

Helphire had agreed to reduce historic claims for accidents against R&SA from £11.84m to £6.52m, payable in three instalments, according to a High Court writ.

But although the insurer paid £5m last December and another £760,000 on 24 May, it refused to pay the balance and still owes £510,000.

Now Helphire is suing the insurer for this amount plus interest, claiming R&SA has breached the agreement by refusing to pay the balance.

By November 2000 there were many claims outstanding against drivers covered by R&SA and the two companies entered into two agreements to settle all the claims. Helphire agreed to reduce its charges by up to 50% and its claims were to be paid within 56 days, the writ says.

In breach of the agreement, the insurer did not pay the first payment of £760,000 until 24 May, instead of 8 January, and paid £250,000 on 13 September after a letter before action.

R&SA said it will contest the action and that negotiations were still taking place to resolve the issue.