Are you being ripped off by motor insurers?


by guest
14th February, 2010 at 9:09 pm    

This is a guest post. The author is a retired barrister.

They tried it on with me. But they struck unlucky because this little old lady had access to free legal advice – her own, remembered albeit from long ago.

When a novice pulled outplace into the main road at the point when my car was passing, his insurers said from the outset that they would not be disputing liability. The bodywork damage was assessed by my repairers and theirs at around £1500, and I was vaguely aware of a doctrine to the effect that insurers were entitled to limit their indemnity to the value of the vehicle.

Having discussed this with my insurers I suggested that they drop out and let me deal with the other driver’s insurers with a view to securing a cash settlement. I also asked my own repairers to go ahead with repairs limited to around £750, which was enough to restore the car’s appearance to respectability (there was no damage to the working parts) and from my searches on the Autotrader website I reckoned that this would be close to the value of my car.

The insurers were represented by solicitors, who told me that the firm’s engineers had valued my car at £275, which they would give me. I told them I wanted £763.75 (the cost of my repairs). They were shocked that the car had been repaired, though the greater shock was realising that I retained possession of the car, whereas she assumed that it had been spirited away and retained by her firm’s engineers. She sent the cheque for £275, with a letter that included the following:

‘We will also notify the DVLA that the vehicle has been written off.’

The vehicle had been given an MOT certificate two months earlier, had suffered no mechanical damage. In reply to this effrontery I wrote:

Please inform the DVLA at once that your information that my car has been ‘written off’ is without foundation…..What you can tell the DVLA is that your firm’s apparent strategy to get my car taken to your garage, where your engineers would declare it a write-off and confiscate it so that you could effect a compulsory purchase for £275, has failed. And if this is how insurers customarily treat the owners of older cars (people assumed to be without the means to dispute your hegemony) it is time it was challenged.

The next, and very rapid development, was a revised valuation of £525. They urged me to reflect on my good fortune in not only being offered this sum, but also being able to keep the car. They never quite got over the idea that the car was mine, not their firm’s engineers, to keep, so it counted as a plus.

So I told them that I was no longer interested in a quiet life “and if your firm wants a quiet life they will pay my £763.75, and if I don’t get it I shall issue a claim in the Small Claims Court.” Susan assured me that the law did not allow me a penny more than their valuation of my car, and I asked her to produce any legal authority that would persuade me that this was a fact.

None was forthcoming, so I issued my claim. This unleashed an intimidating letter assuring me that my claim was doomed to failure and that costs would surely be awarded against me for pursuing a hopeless action. Accompanying this letter was a photocopy of what was said to be the leading case on the subject, Darbishire v Warran [1963] 3 All ER, never overruled since judgment was given in 1963 in the Court of Appeal (and it never will be: who would challenge an appeal decision by taking a case about an old car to the House of Lords?)

It looked like bad news at first glance. A motorist called Darbishire had an elderly car damaged by another driver, and he had it repaired for £192. (This was 1963). He never seems to have bothered to dispute the pre-accident valuation placed on his car of £85. The county court judge found in his favour, but this was reversed on appeal, and the motorist was limited to £85 damages, on the basis that if he could put himself in the same position for £85 as he would be in after spending £192, then he must spend the lesser amount (the duty to mitigate).

However, I spotted some failings. He had failed to inquire about the possibility of replacing his car with one of equal merit for the ‘agreed’ sum of £85. But I had done my Autotrader searches, and provided copies of the results. And I had not agreed to their valuation: I had good reason to argue that I could not replace my car for less than £750. So I had not been unreasonable. Further reading of this case made it clear to me that their trump card was in fact my trump card – a trump that can be played by the owners of all older cars declared to be valueless rubbish by insurers, when to their owners they are viable, working, certificated vehicles.

My favourite quote: Lord Justice Harman: ‘I do not wish to be understood to hold that the market value is always the true measure…’ O wise judge.

And equally good is Lord Justice Pearson’s definitive remark on the meaning in this context of market value, which is:

‘the retail price which a customer would have to pay….on a purchase of an average vehicle of the same make, type and age, or a comparable vehicle. It is not the price for a sale to a dealer or between dealers.’

The latter statement may come as a surprise to insurers – as it may to car owners. In common parlance ‘market value’ means the price you expect someone to pay you if you put your item on the market. You may hope to get from a private purchaser a little more than the price from a dealer. But the price from a private purchaser is not the meaning of market value any more than the price from a dealer. It is the cost to the customer/claimant of purchasing a comparable vehicle. And it is arguable that the purchase price is as much as three times greater than the dealer’s buying price.

Your car reflects your personal taste. A car with five gears and five doors may be more valuable in the open market than my car, which has only four gears and three doors, but mine has metallic paint and an expensive sun-roof. A car with those features may not be readily available in the market. Why should I, the injured party, be required by the wrongdoer to abandon my damaged car for one with someone else’s choice of paintwork and other features, on the grounds that its purchase price is less than the cost of repairs to the car that has my choice of features?

Another substantial argument that has not been raised is that if I have run a car for 12 years as sole owner, it is much more valuable to me than someone else’s similar car of the same age, because I know the car’s history and mileage. Yet another issue is minor bodywork damage. Most old cars have a dent here or graze there, and so long as rust is not involved the owner cares little or not at all. The fetish for immaculate bodywork diminishes after six months and vanishes after six years – unless you intend to market your car. But a feature that diminishes your car’s sale value is irrelevant to the car’s value to you, so it should not seriously affect the valuation.

To sum up, the short message to the owners of older cars who are offered contemptible sums of money is, market value means replacement value, and if you allow your car to be taken away, remember that it is still your car, not theirs, and you are entitled to have it returned to you.

As to the end of my saga, they paid my claim, together with the court fee, and I discontinued the action. And as they paid up they will remain unnamed, because I don’t suppose that they are worse than other insurers. Few solicitors and fewer insurers ever read through judgments unless they really have to, and the Darbishire head-note has perhaps made them really believe that market value means sale value rather than replacement value; some of them may even go so far as to think that they are entitled to buy your old car at their price and treat it as theirs, instead of paying you money for the damage. Well, be it known that this is not the law. It is sharp practice. And it could be a devastating blow to someone of limited means who might have to choose between buying some one else’s £275 cast-off and giving up car ownership. It is targeted at those least able to stand up for themselves, which makes it very sharp practice.

And now that your old banger may worth £2000 with a certificate, now is the time to put a stop to those cheerful letters to the DVLA saying that your car has been written off.


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Filed in: Economics






11 Comments below   |  

Reactions: Twitter, blogs
  1. pickles

    Blog post:: Are you being ripped off by motor insurers? http://bit.ly/aFLylc


  2. Sarah Taylor

    Very interesting esp if you have an old car RT @pickledpolitics Blog post:: Are you being ripped off by motor insurers? http://bit.ly/aFLylc


  3. GabrielleLainePeters

    RT @saturngirl: Very interesting esp if you have an old car RT @pickledpolitics Blog post:: Are you being ripped off by motor insurers? http://bit.ly/aFLylc




  1. chairwoman — on 14th February, 2010 at 10:44 pm  

    Brilliant. A person after my own heart.

    More from this source please.

  2. Refresh — on 14th February, 2010 at 11:18 pm  

    Excellent – thank you!

  3. MiriamBinder — on 15th February, 2010 at 12:39 am  

    Wonderful news … far too few stand up to corporate bullies

  4. cjcjc — on 15th February, 2010 at 8:23 am  

    I like PP’s foray into personal finance.

    Very useful advice.

  5. persephone — on 15th February, 2010 at 1:12 pm  

    more of this please

  6. Mangles — on 15th February, 2010 at 1:18 pm  

    Excellent and well done ‘guest’.

    Rab rakha!

  7. Rumbold — on 15th February, 2010 at 9:28 pm  

    Our ‘guest’ says thank you for all the comments. There may be more from this source in the future…

  8. Alice G — on 22nd February, 2010 at 8:56 am  

    Well done and thank you for sharing, that we may all learn and disseminate further.

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