Causation: Recovery By Insurers From Loss Adjusters

A recent case in the Technology and Construction Court provides a warning to insurers who are dealing with a troublesome insured under a household policy, to make sure that reinstatement works covered by the policy are clearly defined.

The case concerned an insured's attempt to make the Insurer, Axa, pay for extensive remedial work to their house, whilst the Insurer carried out reinstatement work under the policy to deal with subsidence.

Following the settlement of a dispute between the Insurer and the Insured, the Insurer tried to recover its losses (which it said amounted to £1.5 million) from a firm of loss adjusters on the claim. The Insurer alleged that the loss adjuster's extensive breaches of contract led to a situation in which the only way out for the Insurer was to do whatever was necessary to make the Insured's house habitable.

The Judge held that in spite of several breaches of contract by the loss adjuster, the Insurer had not established the loss adjuster's breaches had caused the Insurer's loss, and therefore the Insurer's entitlement to damages was limited to the sum of approximately £283,000.

The judgement involves a consideration of the principles of remoteness, causation and reasonable settlement.

The Insurer's claim against the loss adjuster

The Insurer alleged it would not have incurred very substantial expenditure but for the loss adjuster's breaches of contract. The Insurer claimed it incurred...