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Title: What do they mean by "Without Prejudice"

Date: 06 August 2015

Q.

I had a low speed filtering accident which wasn’t my fault. There was minimal damage, so I reported it to my insurance company and didn’t expect to hear anything further. Sometime later I received call from a lawyer claiming to be acting on my insurance company's behalf, asking for a statement. I gave the statement and then heard nothing further until a fortnight ago when I received a letter stating that my lawyers have paid out the claim to the other party on a “without-prejudice”' basis.

I was told that this means the claim was so small and with the statements from me and the third party contradicting each other that they decided it was cheaper to pay-out rather than dispute the claim, but not admitting liability.
My insurance company have now told me that if they have paid out then I will lose my no-claims bonus.

Can you please tell me if I have been treated properly by Lawyers and Insurers and whether or not I should be entitled to keep my no claims bonus?

A.

Unfortunately, your question highlights the big difference between what most people think their insurer’s job is, which is to fight claims where the policy holder doesn’t think they were at fault, and what their legal obligation is, which is to pay out on any successful claim against you on the condition that you allow them to deal with that claim in any way that they see fit including settling cases which they think are uneconomical to defend.

The only thing that they can’t do is to settle a claim in a manner which would prejudice their policy holder’s ability to peruse a claim against the other party. If they did so you would be able to sue your own insurer. To avoid prejudicing any potential claim while still dealing with the other party’s claim they often settle on a without prejudice basis, which effectively means that they pay in full but without addressing the issue of blame.

This is something that insurance companies do a lot and clearly you should have been kept informed as to what they were planning to do. The end position however probably wouldn’t be all that different unless you were willing to fight the claim with your own money which could prove very expensive indeed.

As far as your no claim’s bonus is concerned, any claim that is paid out, for whatever reason, and whatever the amount counts the same, so if you don’t have your no claim’s bonus protected then I’m afraid you would lose your no claim’s bonus.

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