All the parties involved in a recent High Court case over a local government insurance company have claimed a victory.

Risk Management Partners (RMP) raised concerns over London Authorities Mutual Limited (LAML), a not-for-profit company set up to pool insurance risk for fire, damage and general loss on claims of more than £1m.

RMP wanted to ensure local authorities had the power to set LAML up (ultra vires), and whether Brent LBC, in particular, procured its contract properly.

The judgement states councils do have powers ‘pursuant to wellbeing powers', under Section 2 of the Local Government Act 2000, to join LAML, but Brent based its decision on using Section 111 of the Local Government Act 1972.

LAML has made special insurance provision for Brent, pending any appeal or action by the council to rectify the situation. ‘The judgement was a resounding success for RMP,' said Jolyon Patten, partner at law firm Halliwells LLP, which acted for RMP.

‘It establishes that while local authorities can purchase insurance, they cannot participate in insuring the liabilities of others. The decision provides the clarity we sought, and now enables all the parties to get on with what they do best.'
LAML chairman, Nathan Elvery, also described the outcome of the case as ‘great news' for LAML and local government as a whole.

‘Naturally, we are delighted the judge has stated that authorities have powers to participate in a mutual, provided they are satisfied that by doing so, they are likely to manage risk and deliver economic benefit to their area.'

A further judgement is expected on whether Brent acted appropriately in terms of the Teckal exemption and tender for the business.