A monitored paving slab, claims aggregation and a retention inclusive of defence costs
Northgate Garden Centres holds public liability cover with a limit of indemnity of £2m any one occurrence, a self-insured retention of £25,000 each and every claim inclusive of defence costs, and a claims series provision treating all claims arising from one defect as one occurrence. On 8 March 2025 Mrs Okafor, 61, tripped over a raised paving slab in the car park, fracturing her wrist and chipping two teeth. She was on her mobile phone and had walked past two warning cones. Her solicitors' letter of claim alleges £47,500 general damages, £6,400 care and £2,100 loss of earnings, and states the defect had been reported by three customers since 2022. The maintenance log shows the slab was inspected in January 2024 and marked 'monitor'. Two further customers have since alleged injury at the same slab. Defending to trial would cost roughly £60,000 in legal fees; a realistic pre-trial settlement is around £22,000 including costs.
1. Assess liability and contributory negligence, and explain how you would test the pleaded quantum.
Read the worked answer
Liability. Under section 2 of the Occupiers' Liability Act 1957 the occupier owes a duty to take such care as is reasonable in the circumstances. Three reports since 2022 plus a 2024 inspection marked 'monitor' is the problem: the defect was known and the response was to watch it rather than repair it. A 'monitor' entry is not a reasonable system for a car park used by elderly customers, and the occupier will struggle to show reasonable care. The warning cones help but do not decide the case, and section 2(5) (no duty to warn of obvious risk) is unlikely to apply to a raised slab.
Contributory negligence. The claimant was on her mobile phone and walked past two cones. Under the Law Reform (Contributory Negligence) Act 1945, a reduction of 25–35% is realistic, and the pleaded case will not survive contact with a trial judge at 100%.
Quantum. Test the £47,500 against the Judicial College Guidelines: a wrist fracture with residual stiffness sits well below that bracket, and the care claim of £6,400 needs evidence of need, not just a schedule. A realistic valuation of general and special damages is nearer £18,000–£25,000 before the reduction.
Overall. The probable outcome is a liability finding against the insured with a reduction, so the file should be reserved as a likely settlement, not a defence, and liability should not be denied outright in correspondence.
2. Explain how the self-insured retention and the claims series provision affect the reserve, and build a reserve for the file.
Read the worked answer
Read the retention as a layer, not a discount. The retention is £25,000 each and every claim inclusive of defence costs, so defence costs erode it before the insurer's money is touched. That changes the economics: spending £60,000 to defend a £25,000 claim is irrational, and even £18,000 of defence costs uses most of the retention.
Aggregation. The claims series provision treats all claims from one defect as one occurrence. The slab is one defect, so the three claims should be aggregated to a single £25,000 retention and a single occurrence under the £2m limit - not three retentions. Read the wording carefully: 'arising from one defect' is wide enough, but confirm whether it also aggregates the two later claimants who have not yet issued proceedings.
Build the reserve bottom-up:
- Indemnity: three claims at roughly £15,000 each after reduction = £45,000 (with one settled early at £12,000, the reserve can reduce).
- Defence costs to conclusion: £18,000 if settled pre-trial, £60,000 if fought.
- Gross reserve: £63,000. Insurer's net after the single £25,000 retention: £38,000.
- Note the gross figure on file but report the net to management, and record the assumption that the retention is not reinstated per claim.
Review triggers. Any further slab claim, an admission on the inspection regime, or a refusal of a joint settlement meeting should prompt a reserve review.
3. The claimant makes a Part 36 offer of £20,000. Explain the settlement decision, including the effect of the retention on who bears the cost.
Read the worked answer
Use Part 36 deliberately. A claimant's Part 36 offer of £20,000 creates costs consequences if the insurer fails to beat it at trial: indemnity costs, interest at up to 10% above base, and the claimant's costs on an indemnity basis from the date of expiry. Conversely, a well-pitched defendant's offer shifts the risk to the claimant.
Work the numbers with the retention in mind. A trial outcome of £22,000 damages plus £60,000 costs is £82,000 - of which the insurer pays only the excess over £25,000, so about £57,000. A settlement at £22,000 inclusive of costs sits entirely within the retention: no insurer outlay at all, but the insured bears it. That is the strongest argument for settling early, yet it must be explained to the insured, because the retention means it is the insured's money funding a settlement it may prefer to fight.
Practical steps. Obtain the medical evidence before offering; consider a joint settlement meeting; make any offer 'without prejudice save as to costs' unless Part 36 is intended; check whether the insured's consent is needed under a claims-control clause; and confirm the effect on the two later claimants - an early admission on the inspection system may increase their value, so negotiate globally or reserve accordingly.
Record the reasoning: the decision is a commercial one about the insured's money as much as the insurer's.