Accident Exchange is taking automotive consultants Autofocus to court over allegations that it gave bad information in compensation cases going as far back as 2007.
Steve Evans, Accident Exchange chief executive, said cases which could make up millions in missing revenue to the company have been affected by “factually incorrect” evidence given by Autofocus on estimates on how much replacement vehicles would cost.
Accident Exchange says this evidence was often significantly undervalued, meaning it recovered less than it should have, affecting its financial results.
Accident Exchange posted a full year reported loss before tax of £55.4 million after exceptional charges in comparison to a £9.9m profit the year before in its financial results in July.
Evans said: “We didn’t realise the reason why we were suffering the way we were financially and when this problem came to light, suddenly all the planets came into alignment.
“We think that it involves about two or three thousand cases and the average value of a case might be three, four or five thousand pounds.”
Evans has a team of 16 investigative officers searching through a paper trail at Accident Exchange’s Birmingham head office.
Evans said there had been no disruption to operations because of the legal case and he was expecting a fairly quick turn around “in the next four to six weeks”.
Autofocus has been served for high court action today. It denied the allegations completely, adding it “rejects these allegations in the strongest possible terms and intends to defend itself and its reputation”.
The dispute boils down to “spot rates” – estimates of how much cars cost to replace. Accident Exchange said solicitors for insurance companies looking to minimise payouts were increasingly turning to low spot rate estimates from Autofocus.
It said recovery levels had dropped from the start of the year, which they originally put down to the recession and insurers trying harder to avoid payouts. But it said an internal investigation pointed to a different source.
In a statement to the stock exchange, Accident Exchange said: “Accident Exchange has recently discovered and obtained direct independent evidence that the lower rates awarded by the courts were, in some cases, based on the defendant producing evidence on spot hire rate from Autofocus.
“The findings of the investigation have been communicated to the insurers and solicitors of the ‘at fault’ driver (the defendant in these Court cases) and is expected to form the basis of an action for damages against Autofocus.”