Examining the record £910,000 payout by an insurance company to repair a supercar
One of the biggest headaches I have ever had while working in personal injury law, specifically when dealing with road traffic accidents, was having to explain to clients over and over again that although they may have bought their vehicle for X amount they would more than likely have to accept the valuation of Y due to a number of issues such as depreciation or diminution of the vehicle’s value.
As anyone should know, the minute you purchase any vehicle, whether it be an Aston Martin or a Peugeot 206, and whether it be brand new or second-hand, it loses a substantial amount of its value, but there are more factors that determine your vehicle’s worth than merely just depreciation. If your vehicle is involved in a serious accident and it is determined that it will cost more to fix your vehicle than it is worth, your insurance company will usually write off the vehicle and declare it a total loss. This means your insurance provider will then pay you what it decides that the vehicle was worth at the time of the accident.
Diminution of value is the loss of financial worth of something because of damage sustained to it. This concept, while in this case referring to vehicles, can equally relate to property or other financial investments*. In theory, after your vehicle is repaired, it should be worth the exact same amount that it was worth before it was damaged. However, if the damage was particularly extensive, and especially if your vehicle is fairly new, it is reasonable to assume that your vehicle will not be worth as much after it is repaired as it was worth before it was damaged. A claim for the difference is called a diminution of value claim. This claim is based on the somewhat common sense notion that a reasonable buyer would not pay as much for a vehicle that has had extensive damage repaired as they would for the same vehicle that has not had extensive damage to it. Prestige vehicles specifically have a very good chance of successfully claiming for diminution as a damages claim. After all, a Ferrari is likely to lose a lot more of its potential resale value than a Ford Focus would.
My head really starts to pound when trying to explain the above concepts to clients who feel that because they paid £6,500 for their Mini Cooper three years ago that they should be entitled to the same amount back. Well thanks to Mr Rowan Atkinson I’m sure there will be many more headaches to come for those that practice personal injury and debt recovery matters.
Atkinson’s unnamed insurance company have had to fork out £910,000 to repair his McLaren F1, making it the largest car insurance bill ever recorded in Britain. The total bill is three times as much as the previous record-holding insurance payout by Aviva in 2010 when they paid out over £300,000 for a crash involving a Zonda supercar. Although in this case the Zonda was worth £528,000 new so repairing it was far more cost-effective than writing off the damaged vehicle.
Adam Cracknell. a spokesperson for Aviva, at the time said: “This is the biggest insurance payout we have had for repairs to a private car in the UK. This is out of the ordinary for an insurer. Although the vehicle was badly damaged, Aviva decided that the car may be repairable and set about making arrangements for the car to be shipped across to Modena, Italy, home of Pagani, the vehicle manufacturer.”
Atkinson’s vehicle, bought in 1997, was purchased for £640,000. However, unlike the vast majority of vehicles on the road today the McLaren F1 has actually increased dramatically in value since 1997. One McLaren F1, in perfect condition, sold for £3.5 million last year. As a result of this the unnamed insurance company has given the go-ahead for the repair work.
Now of course Atkinson’s McLaren F1 case is the exception to the rule of compensation in road traffic cases. It is only in situations where the most prestigious or rarest of vehicles that this is likely to occur. That being said I am sure there will be many clients arguing with their lawyers and insurance companies that their Citroen Saxo was worth far more both financially and sentimentally to them. Just thinking about it I am starting to get a headache.
*With vehicles, however, the amount of diminished value depends on whether inherent diminished value or repair-related diminished value was the cause of the loss of value. Inherent diminished value means that there is some problem with the vehicle that was not caused directly by an accident. Repair-related diminished value refers to the loss of value following repairs after an accident.
Disclaimer: The views expressed are those of the writer and this article does not constitute legal advice.