Case study 10

Case study 10

The case:

In October 2014, Miss W instructed a claims management company (CMC) to assist her in making a claim for damage to her motor vehicle via a third party insurer (TPI) after a road traffic collision.

Following an inspection by an independent engineer, the CMC wrote to Miss W on 13 October to advise her that the vehicle had been ‘damaged beyond economic repair’ and had been assessed as having a pre-accident value of £3950. The salvage value was anticipated to be £711. The inspection found that the vehicle had been struck in two directions; to the rear and to the offside.

The salvage value is often referred to as the scrap value for the damaged vehicle. It is common practice for TPI’s to pay the pre-accident value minus the salvage value. The damaged vehicle then remains the property of the owner to dispose of as they see fit. This can include selling the salvage to realise the salvage value or repairing the vehicle to return to the road.

In Miss W’s case, the offer proposed was that she would receive £3239 from the TPI and £711 should she sell the salvage. The letter from the CMC told Miss W that the offer was made ‘on a without prejudice basis subject to final agreement by the third party’s insurer of both valuation and liability.’ Miss W did not respond to this letter.

The CMC subsequently contacted Miss W by telephone on 30 October. A recording of this call was made available to the investigator by the CMC. In this call, Miss W was advised that if she didn’t want to keep the damaged vehicle, she would receive £3239 from the TPI plus £711 from the sale of the salvage. Miss W confirmed that she did not want the car returned to her and the CMC arranged for the car to be sold for salvage.

Following a further assessment of the vehicle by the TPI’s own engineer, it was decided by the TPI that the damage to the vehicle contradicted the circumstances of the collision. The damage to the offside was deemed to be more consistent with contact from a sharp object than contact with a barrier and consequently, the TPI settled the claim based solely on the damage caused to the rear of the vehicle.

Miss W received £1309.50 from the TPI in full and final settlement of the claim. The salvage value remained the same.

Miss W complained that during the telephone call on 30 October she understood that the offer of £3239 had been agreed and that it was on this basis that she had consented to salvage her vehicle. She further complained that the vehicle had been sold for salvage before she was informed that a lesser amount had been offered by the TPI.

By way of resolving the issues, Miss W sought the difference between the initial offer and the final settlement figure, namely £1292.50.

The Legal Ombudsman’s investigation found that:

  • On receipt of the letter from the CMC dated 13 October, Miss W could have been in no doubt that the initial offer of £3239 plus the salvage value was subject to change.
  • On listening to the call of 30 October however, the CMC failed to make it clear that the offer of £3239 had still not been agreed. Based on the conversation between the parties, it was reasonable for Miss W to have concluded that the offer was now final.
  • The poor service provided by the CMC was deemed to be the CMC’s failure to explain to Miss W that the initial offer had still not been agreed. As a result, Miss W was denied the opportunity to make an informed decision about whether or not to accept the offer made by the TPI and/or retain her vehicle.
  • The Legal Ombudsman did not agree with Miss W that the CMC’s failure to make clear that the offer was subject to change meant that she suffered a financial loss. The Ombudsman found any financial loss suffered was as a result of the TPI paying less than she expected. Even if the CMC had properly advised Miss W, the TPI would still have made the reduced payment.
  • The CMC could not be held responsible for a third party decision.

The Legal Ombudsman awarded Miss W £250 in compensation for the loss of opportunity of making an informed decision.

Learning points for CMCs:

This case highlights to CMCs, the importance of:

  • Providing clear advice in a meaningful and understandable way when discussing matters with a customer informally over the telephone. It is good practice to confirm a customer’s instructions in writing particularly in circumstances where significant or irreversible decisions have been made.