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19 March 2024 | Comment | Article by Alun Tobias

Subrogated Claims Update: Armstead v RSA

Alex Howells, Associate in the Insurance and Corporate Risk team discusses the recent judgement in Armstead v RSA.

The Supreme Court recently handed down judgment in Armstead v Royal & Sun Alliance Insurance Company Limited [2024] UKSC 6. We consider the background to the dispute, the issues addressed by the court and how claimants and defendants might view the decision.

The Facts

The claimant (and appellant), Ms Armstead, was involved in a road traffic collision, following which she hired a car from Helphire Ltd (“Helphire”) on credit hire terms (“the Agreement”) while her own car was being repaired.

The Agreement included an obligation on the claimant to return the hire vehicle in the same condition as it was when it was hired to her and to indemnify Helphire for any damage caused to the vehicle. Where the vehicle was unavailable for hire due to damage, the Agreement required the claimant to pay Helphire for loss of use of the vehicle based on the daily hire rate up to a maximum of 30 days (“Clause 16”).

Less than two weeks after entering into the Agreement, a negligent driver’s vehicle collided with the claimant causing damage to the hire vehicle. After returning the vehicle to Helphire, it required repair and was out of action for 12 days. Helphire sought to enforce Clause 16 and demanded £1,560 (“the Clause 16 Sum”) from the claimant.

Helphire brought proceedings against RSA, the negligent driver’s insurer, in the claimant’s name seeking the Clause 16 Sum.

The Supreme Court Decision

Having been dismissed at first instance and subsequent appeals at Walsall County Court and the Court of Appeal, the claimant’s third appeal was heard before the Supreme Court on 23 November 2023.

The Supreme Court’s judgment covers various issues, many of which will be of interest to insurers on both sides of subrogated claims.

The court restated general principles of the tort of negligence, including that:

  1. A person owes a duty of care not to cause physical damage to another person’s property (including a vehicle) and, if that duty is breached, is liable in damages to compensate that person for the diminution in value of the property and any other loss consequent on the damage. Recoverability of these losses is subject to the general principles limiting recovery of damages in tort, including that losses are not recoverable if they are too remote a consequence of the wrongdoer’s breach of duty.
  2. Someone who negligently damages another’s property is not liable for pure economic loss, meaning economic loss not consequent upon damage to, or loss of, a claimant’s property.
  3. To count as a claimant’s property for the purpose of determining whether loss is pure economic loss, it is not essential that the claimant owns that property and a right of possession over the property is sufficient (e.g. a bailee, as in Ms Armstead’s case).
  • Applying these principles, the court accepted that the claimant, as bailee of the hire vehicle which had suffered damage, was liable to pay Helphire the Clause 16 Sum and, in turn, entitled to recover that sum as damages from RSA, subject to whether the loss was too remote or not recoverable due to some other limitation on the recovery of damages in tort.
  • There was no reason in principle why a contractual liability between a claimant and third party (in this case, the Clause 16 Sum which the claimant was liable to pay Helphire) should not be recoverable, so long as it is consequential upon damage to the claimant’s property (in this case, the hire vehicle to which the claimant had a right of possession).
  • RSA’s argument that the Clause 16 Sum was pure economic loss and not recoverable was rejected. The claimant’s liability to pay the Clause 16 Sum was a factual consequence of physical damage to the hire vehicle and did not constitute pure economic loss.
  • The “real issue” was whether the Clause 16 Sum was too remote a consequence of the negligent driver’s breach to be recoverable. The claimant accepted that the Clause 16 Sum had to represent a “genuine and reasonable pre-estimate” of Helphire’s loss of use, failing which it would be considered too remote.
  • Once a claimant proves that a tort has been committed and the loss was caused by the defendant’s breach, the burden of proof is on the defendant to establish that the loss is too remote and therefore not recoverable. Applying this to the instant case, the burden of proof was on RSA to establish that the Clause 16 Sum was too remote and not recoverable on the basis it was not a reasonable pre-estimate of Helphire’s loss. However, RSA did not adduce any evidence to prove this point, leaving the court to decide that the Clause 16 Sum was not too remote and therefore recoverable. If a defendant is able to establish that the contractual “loss” claimed is not a reasonable pre-estimate of loss, the court will instead award a lesser sum for reasonably foreseeable loss of use.

Having tackled these issues, the Supreme Court allowed the claimant’s appeal and awarded her the Clause 16 Sum.


Although the sum claimed was a modest £1,560, the issues were of sufficient importance for the matter to be contested from Walsall County Court to the Supreme Court. As Lord Leggatt and Lord Burrows put it, “…the decision has the potential to affect a significant number of other cases” and “…raises some fundamental questions in applying the tort of negligence in a situation where economic loss, comprising a contractual liability to pay a sum of money, has resulted from physical damage to property.”

The court’s restatement of general principles relating to negligence will be familiar, but the judgment provides welcome clarity on other areas less well trodden by the courts.

Through the lens of subrogated claims, and generally, claimants will welcome the court’s comments on the entitlement of bailees (and not simply owners) to sue, possessory interest in relation to pure economic loss, recoverability of contractual liabilities between claimants and third parties, and the burden of proof with respect to remoteness.

On the other hand, defendants will be pleased that the court has laid the foundations for limiting damages arising out of contractual liabilities between claimants and third parties to a “reasonable pre-estimate” of loss, and that may prove to be a battle ground going forward.

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Key contact

Alun Tobias


Alun Tobias heads up the subrogated recovery team and advises both insurers and large corporates on high value/complex subrogated recovery claims. Alun’s advice expands across the spectrum of perils, including high value/complex impact, escape of water, flood, fire, landslip and subsidence. As part of his role, Alun leads a team of five lawyers specialising in recovering outlays for insurers, with a particular focus on losses, in the construction industry.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.


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