Why we avoid litigation
A well respected motoring journalist and seasoned racer borrowed a famous classic racing car for a magazine test on essentially the “you bend it, you mend it” basis, for a nominal payment. He missed 3rd gear (apparently despite warnings) and over-revving caused £40,000 of damage to the engine.
The owner insisted that insurance was taken out by the borrower, but unfortunately the driver simply assumed that he had comprehensive cover via his publisher. It turned out however that this only covered accidents, not mechanical failure.
Self denial and a refusal to pay
Unable to afford it himself and facing a hard reality, in an unfortunate spiral of self-denial he refused to pay or even negotiate. It is said that at some point pre-trial, a famous rock star offered to pay the repair costs, the problem was the claimants legal costs at that time were already about equal to the claim and he wanted those as well, but these were not part of the offer.
There was such immense bad feeling and acrimony (not just personally but opinions flying around the tight racing community), including accusations of lying, that eventually it went to court.
The judge awarded over £47,000 for the claim, loss of use, and interest, plus legal costs of around £76,000 (and that was only the claimants legal costs, not the defence costs). Sadly, this bankrupted the defendant.
So, the claimant won. Or did he?
It is a rule of thumb that you will actually recover about 60% of your costs. If the claimant received £76,000, so it would be reasonable to assume that his actual legal bill was in the order of £126,000.
Thus, on balance the claimant is overall actually £50,000 out of pocket (on a £47,000 award).
And, if the defendant declared bankruptcy, the claimant almost certainly did not get all his money, and may well have been out of pocket for at least TWICE as much as he was claiming.
Some reminders we take from this sad tale:
- There are no winners in litigation, avoid going to court like the plague.
- How often do YOU take the time to properly read, understand and check your insurance cover? There is no such thing as ‘fully covered”.
- People are very relaxed when someone else is taking the Risk. When it comes to YOUR Risk, never Assume, always Verify (in this case, both the owner AND driver should have checked the policy – this is why contracts have the ‘produce insurance policy on demand’ clauses).
- Make sure someone has the financial wherewithal for any liability before you enter a contract AND before you sue them. This took at least 2 years of each parties lives.