Lessons to learn, the Bent case and what other important rulings mean for credit hire

In the light of Bent v Highways and Utilities Construction & Allianz Insurance (2011) (“Bent 2”) and the other recent Court of Appeal cases (Sayce v TNT (UK) Ltd (2011) and Pattni v First Leicester Buses Ltd (2011)), how should compensators tackle the thorny issue of credit hire claims?

The recent case of Sayce upheld the principles previously laid down in Copley v Lawn (2009) –  that where the compensator makes a valid offer of a replacement vehicle, the claimant’s right to recover is limited to the rate that would have been paid to the intervention provider by the compensator.

The best way to limit exposure is by having an effective intervention team to make an early offer of a replacement vehicle. Ideally, the third party will accept the offer, but even if the offer is rejected, the compensator will have proof that the offer has been made and it can be referred to at a later date if necessary.

Obviously, under the ABI GTA scheme, if the credit hire organisation (CHO) gets to the claimant first and the compensator is a subscriber to the scheme, the intervention provider is 'locked out'.

If the claimant tells the compensator in the intervention call that they have a replacement vehicle already, the opportunity should be used to fact find – for example, did they need a BMW or would a Mondeo have done? If so, when the claim is presented, a compensator will have the basis to argue for a reduction from, say a P3 to an S6 class of vehicle – a considerable saving.

Bone of contention

Whether a particular vehicle was appropriate remains a bone of contention. In W v Veolia Environmental Services (UK) Plc (2011) the judge clearly had difficulty with the concept of giving a £130k Bentley to someone who owned a £16k Bentley, but because no evidence was presented as to the BHR (Basic Hire Rate - formerly known as “Spot Rate”) for, say, a £30k BMW 5 series, the case was assessed on the Bentley rates. The judge said that it was “unimaginable that he would have hired a replacement vehicle as new and valuable as the one supplied” – if ever there was a case at the Court of Appeal where the concept of “like for like/reasonable replacement” could have been tested, it would appear to have been this one. The claimant needed to maintain an “image” at the golf club – would that image have been harmed by turning up in a BMW 5 series, available for less than £100 per day on the BHR?

Post Bent 2, greater weight is going to be placed on what the BHR was at the time of hire as opposed to the later point at which evidence is obtained for negotiation or court proceedings. Whether it be the intervention team or the claims handlers, as soon as a hire claim is intimated, online quotes should be obtained from local hire companies or the local branches of  national hire companies. Those quotes should be for vehicles which are the same as the accident damaged one, or the hire car (if it was an appropriate one). That will give the compensator (or its lawyers) the evidence of the BHR at the time of hire, to counter evidence which may be provided by the CHO or the claimant’s lawyers.

Online quotations can also be obtained for excess reduction insurance which would give compensators the “spot” rate as opposed to the substantial excess reduction costs charged by CHOs.

CHOs and claimant lawyers have always had the ability to obtain their own BHR evidence – few ever did, preferring to proceed in the hope of recovering the credit hire rate. Increasingly evidence is being presented on behalf of the claimant, but that does not mean that it should be accepted without analysis.

CHOs maintain that the benefit of hiring from them is a “nil” excess – does the claimant’s evidence include this? If the hire vehicle was a manual hatchback from a city location, then the compensator should exclude quotes for automatics/estates/airport locations, all of which tend to carry a premium. If the hire was for a prolonged period, then seven-day rates may not be appropriate – in Bent 2 a reduction was applied to reflect the difference for longer term rates.

Speed up settlement

In litigated cases, no allowance should be made for interest (contractual or otherwise) in the light of the decision in Pattni.

Credit hire remains a huge area of claims spend for compensators, hence the number of test cases going to the Court of Appeal. However, compensators need to choose the right cases to fight. A seven-day hire of a Ford Focus, even if the hire is a couple of days too long, is going to cost more to fight than is going to be saved. However, we frequently see 30-day hires for a one-day repair on a drivable vehicle – those are the cases where significant savings can be made. Using tools available to us in the Civil Procedure Rules, cases that would otherwise be Fast Track cases attracting costs, can often be turned into Small Claims Track cases with fixed costs, thus making them economic to fight.

Equally CHOs and claimants’ representatives need to put their cases properly – if the hire vehicle was not a reasonable replacement, the cost for the appropriate vehicle should be claimed. If the period is not justified, the period that is should be claimed. If the matter becomes litigated and it is known that the claimant is pecunious, this should be stated at the outset. All of this would speed up settlement, reduce litigation spend on both sides and aid the CHO’s cash flow.

However, it hasn’t happened for the almost 20 years that I have been dealing with credit hire claims, so I am not holding my breath.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Gavin Perry

Partner - Head of Credit Hire

I am a Partner in the Insurance team and Head of Credit Hire.