Finance: An accident insurance black spot

Having a prang is bad enough, even if you're insured. But to be marked down as a bad credit risk as a result adds insult to injury. By Grania Langdon-Down
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When Joan Edwards went to buy a fridge freezer, she had no idea that a car accident three years ago would stop her being given credit. She was mortified when credit was refused, and resolved to find out why, as she had no knowledge of any bad debts against her name.

However, a search revealed that Mrs Edwards (not her real name) had had a judgment recorded against her for pounds 1,600 three years previously. When she checked with the court, she found that it was the result of court proceedings following a car accident which she believed had been satisfactorily resolved by her insurance company.

Her solicitor, Jim Rymer (senior partner of the Liverpool insurance solicitors Silverbeck Rymer) believes that thousands of people who have had a road accident insurance claim made against them could find they have unknowingly got a "black mark" registered against their name. He said the County Courts Act 1984 requires courts to register the amount and date of debt judgments with the Registry Trust in London. If the judgment is paid in full within one month of registration, it can be removed from the register. Once it is paid, after a month the word "satisfied" is marked next to the debt judgment. But because only limited details are given, some lenders still perceive the person to be a bad risk and so refuse credit.

Mr Rymer said: "In Mrs Edwards's case, the insurance company resurrected the papers, which showed that it had settled the claim satisfactorily within a month. However, the court was not notified of this by the plaintiff or his solicitors.

"We have now applied to the court to have the judgment removed from the register. But it means getting confirmation from the plaintiff that the amount was paid, and an affidavit from the insurance company explaining what had happened. It is then down to the judge's discretion whether he issues a Certificate of Satisfaction to remove this unnecessary black mark against Mrs Edwards's name.

"It can take up to three months to untangle cases like these, and cost anything up to pounds 750. In some cases, we have had to instruct inquiry agencies to track down the original plaintiff, who has moved, to get their confirmation that payment was made.

"It seems manifestly unfair on the individual when they have effectively played no part in the legal proceedings arising out of the accident, given they were indemnified by the insurance company and have no responsibility over when judgments are settled.

"In some cases, the fault lies with the insurance company. But in many others, the insurers are being unfairly blamed for what is really a problem with the legal system."

Eileen Brennan, senior lawyer for the Consumers' Association, said it was not an issue they had investigated. However, she said the Lord Chancellor's Department was currently reviewing the enforcement of county court judgments and had asked for suggestions on what information should be kept on the register. "It is a tricky one. But if it is causing consumers unnecessary problems, it ought to be looked at, possibly in conjunction with that review," she said.

Mr Rymer said his firm had been involved in about 40 similar cases over the last 18 months and a number of insurance companies had spoken to him of their concern. "This must be just the tip of the iceberg. Over the last two years, there has been a huge increase in the amount of litigation arising out of road traffic accidents. Previously they would have been settled through negotiation. But many more now result in proceedings being issued, perhaps because solicitors have become more aggressive in how they handle these cases.

"Many are then resolved without the defendant having to be involved personally, so there must be thousands of judgments registered without the knowledge of the defendants themselves."

He said the County Courts Act was rightly brought in to alert creditors of the existence of any debt judgments against a potential client. But it was intended for cases where individuals had failed to pay a debt. "Does the fact that somebody has had a motor accident make them a bad risk? No, so safeguards need to be introduced," he maintained.

One option would be for the Lord Chancellor to consider either making judgments arising out of RTA insurance claims special cases which would not be automatically registered, or by extending the time for which a judgment is automatically registered to six weeks, with the added proviso that the plaintiff or their solicitor be under an obligation to notify the court when payment has been made.

Mr Rymer has urged a review of the 1984 Act. However, the Court Service has told him there are already safeguards to protect the interests of judgment debtors. Judgments paid after a month remained on the register because the length of time it took to pay a debt was an indication of credit worthiness. It suggested it was the "essence" of civil law that the conduct of proceedings rested in the hands of the parties concerned. So, even if the defendant did not take an active part in the proceedings, it remained his responsibility to ensure they were concluded fully, and any payments ordered were made promptly. It went on to say that it would not be "appropriate" to put the onus on the plaintiff to notify the court when payment was made, given that he had already had to go to court to recover money to which he was rightly entitled.

However, Mr Rymer said: "The response just glosses over the issues. Unless there is a serious reform of the registration of county court judgments, then injustices will continue to occur. The law has to be flexible, to meet changing circumstances."