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COS Services Ltd v. Nicholson [2017] UKUT 382 (LC): Testing the Reasonableness of Insurance Premiums

In the above case the Upper Tribunal considered what is the test to apply in considering whether or not relevant insurance costs were “reasonably incurred”.
The Landlord was required to insure the properties. The Tenants contended that the price the landlord had obtained was unreasonably high and said they could obtain quotes about 75% below the landlords quotes.
The Upper Tribunal determined that the test is not just a question of looking at whether the landlord in his decision making has acted reasonably in making its decision. The landlord must also take account of all the circumstances including the fact that it is the leaseholders who pay.

In this instance the Upper Tribunal reiterated that the landlord does not have to go with the cheapest quote and there is nothing wrong per se with a landlord having a block policy for its portfolio. In this case the landlord was not able to provide evidence explaining why the premiums could be four times the amounts which the leaseholders had obtained. As a result the premiums were determined to have not been reasonably incurred.
As ever each of such questions will always turn on its own facts but landlords should look to be transparent in their arrangements. Likewise if leaseholders seek to challenge having “like for like” 2 quotes is key.

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