West Midlands car replacement firm Accident Exchange has been given the legal go-ahead to pursue a compensation claim against a company it blames for inflating insurance claim costs.
Accident Exchange provides replacement cars to drivers involved in no fault accidents.
The Hams Hall firm has had a tough financial year, and puts part of the blame on cases where payouts were determined by evidence from Autofocus.
In yearly results published on December 30, the company announced a loss of £6.5 million. Revenue was down to £61.6m, compared to £85m in the year before.
Chairman David Galloway said: "The financial crisis and the recession that has followed have altered operating conditions, imposed new challenges and exacerbated existing ones. Having discovered the systemic dishonesty in Autofocus' rate evidence during the period, we are pursuing a legal remedy against them and have also made some progress in accelerating claim settlement by improving the subsequent engagement of insurers and their defendant solicitors.
The company was planning to take legal action against Suffolk-based Autofocus over thousands of cases it said had cost it as much as £22 million.
Accident Exchange put out a statement to the Stock Exchange earlier this year saying its suspicions had been raised after one case in September, which had led it to go back over millions of pages of legal documents to see how many claims might have been based of allegedly exaggerated evidence.
The problems are based on “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.
Autofocus has always denied this, and applied to the High Court for the case to be struck out because there was no cause of action. But the judge said the case should go-ahead, although it would be narrowing the case down. He also said Autofocus had the option to appeal against the decision.
A spokesman for Autofocus said they were pleased at the decision by the judge, even though he had not struck it out as they were hoping.
He added it would be using its opportunity to appeal, and said: “While it is disappointing that the case was not dismissed in full, Autofocus is confident of success in the Court of Appeal or at trial.”
He said the company would now be resubmitting its case at the earliest possible date in the new year.
“In the meantime, Autofocus is delighted that the company is still receiving many instructions from important clients. Autofocus rates surveyors are attending court regularly to give oral evidence.”