Damning ruling on E&J’s insurance over-charging

One of the largest leasehold sector players E&J Estates – a self-proclaimed long-term custodian of leasehold properties – has been subject to a damning tribunal ruling over its insurance practices.

The case involved a site managed by FirstPort that deployed the insurance expertise of E&J’s own insurance captive Augustus Insurance, and its in-house insurance team Penult Capital Partners
Limited.

In spite of a barrister and two professional witnesses from the insurance sector, Tim Wilson and Chris Dines, the tribunal was resolutely unconvinced, stating:

“… in respect of their responses and evidence as to processes applied to ensure fair and competitive insurance premiums, the Tribunal found their evidence to be lacking transparency, economical as to disclosures, contradictory and lacking credibility.

“In short, we do not find that the Tribunal was presented with the evidence required to show that the premiums charged were reasonable and not artificially inflated by the connected nature of the
various parties or the adoption of a portfolio insurance approach.”

The ruling (below) is a personal victory for Brian White MBE, a chartered tax advisor, indignant at the hiked insurance costs at his daughter’s flats at 1-80 Hollins Court Bank, Blackburn, BB2 4GY.

The tribunal victory means that E&J must repay thousands in overcharged insurance – about half that charged – with the allowable insurance cost for the block set at

2021 – £14,000
2022 – £15,000
2023 – £16,500

The tribunal stated:

“As it stands, the Tribunal has not been presented with one item of documentary evidence to suggest that the insurance premiums for the building are competitive. Rather, the evidence is that no other
companies would insure these premises either individually or as part of a portfolio of properties irrespective of the premium rate: they simply were not interested. Following on from that, no documentary evidence has been submitted to show how premiums were calculated nor indeed how, in the event of no alternative quotations or insurers, how Augustus alighted on the amount it should charge for reinsurance and how this impacted upon the overall premium negotiated and ultimately agreed with Zurich.”

Mr White described the insurance process as “wholly incestuous”.

Of E&J’s Augustsus Insurance, he claimed:

“Profitability of Augustus -The 2020 and 2021 accounts for Augustus are revealing. They show Premium income of £5.1m and £4.3m and respective profits of £ 1.5m and £1.9m. No other insurance company makes such profit margins.”

In addition:

“Augustus insurance company has a very low share capital of £450k (note 6) and has capped its insurance obligations at 125% of premiums written so they have limited risk of making any loss , unlike any other insurance company. That explains the obscene profitability of Augustus. The proportion of premium transferred to the captive bears no correlation to the risk, as it is capped so low. No other insurance company has such low pay out limits compared to premiums written.”

The full ruling can be read here:

https://www.leaseholdknowledge.com/wp-content/uploads/2024/05/Hollin-Bank-Court-final-decision.pdf

E&J witness statement addressing its captive insurance arrangements:

https://www.leaseholdknowledge.com/wp-content/uploads/2024/05/EJEstatesinsurancewitnessstatement.pdf