Supreme Court backs mutual in insurance case

The Supreme Court has backed a group of London local authorities in the latest stage of a long running legal battle over whether councils can club together to buy insurance.

In a landmark judgement issued yesterday, the UK’s highest court ruled that councils can form mutual to award contracts for insurance services without having to go through the normal procurement hoops.

The case was sparked by the formation by ten London local authorities formed of a joint venture , called the London Authorities Mutual Ltd (LAML) , to bulk buy insurance services on their behalf. Brent council then awarded LAML a contract to supply insurance services without putting out a tender

Arthur J Gallagher subsidiary Risk Management Partners (RMP), which acts as an agent for Chartis in the UK public sector, took Brent to court on the grounds that if a tendering process had been carried out, it might have won the contract. RMP claimed damages from Brent.

The High Court ruled in 2008 that Brent had acted beyond its powers by awarding the contract to LAML, a decision which was upheld by the Court of Appeal in the following year. Harrow council then appealed to Supreme Court which overturned the lower courts ‘decision yesterday with a unanimous ruling that authorities participating in wholly-owned shared service vehicles can award them service contracts outside of the public procurement process.

The Supreme Court ruled that Harrow were entitled to do this as they exercised control over LAML similar to that exercised over their own departments, satisfying a key test in EU procurement law.

Martin Fone, LAML’s managers Charles Taylor Consulting plc, said that the ruling was important for determining the procurement law surrounding mutual organisations like LAML.

“This is a very bitter-sweet moment. It is very satisfying for the highest court in the land to confirm our initial legal assessment of the options available to authorities but sad that it has come too late to save LAML.

“Shared service delivery vehicles are at the centre of plans for maximising the efficient delivery of public services. This judgment gives clarity to the procurement point and the specific powers available to best value authorities to establish insurance mutuals together with the soon to be implemented general powers of competence remove unequivocally the key concerns about implementing this agenda.

“We are pleased to have played our small part in getting to this stage and look forward to working with authorities to take advantage of these hard won powers”.