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Council insurance action 'illegal'

PUBLISHED: 22:12 30 May 2008 | UPDATED: 13:16 24 August 2010

by Duncan Brown The High Court has ruled that a council acted illegally when it took insurance from a company established by London councils to undercut the expensive private sector. The landmark ruling is a blow to the controversial L

by Duncan Brown

The High Court has ruled that a council acted illegally when it took insurance from a company established by London councils to undercut the 'expensive' private sector.

The landmark ruling is a blow to the controversial London Authorities Mutual (LAML) insurance company, which drew criticism from private competitors when it was set up by 10 councils including Brent Council in 2007.

Lord Justice Stanley Burnton ruled that Brent sidestepped procedures which exist to ensure competition for council contracts when it awarded the half-million pound insurance job to LAML last April.

Brent based their defence on a special exception that allows

councils to skip procedure when they have direct control over the company they appoint, but Lord Justice Burnton found that it did not apply in this case.

He ordered Brent to pay legal costs to claimant Risk Management Partners, a private insurance firm who were glad to see Brent's decision branded officially unfair.

The managing director of RMP said he was 'delighted at the court's findings.'

A Brent Council spokesman said: "Private insurance is expensive and suffering from a lack of competition in the public sector market." The LAML was to reduce costs by up to 15 per cent.

The council has already commenced an appeal.

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