|
Some interesting points have been made in this thread but they don't go too far to clarify things - in fact the opposite as they seem to add to the confusion.
Perhaps we can work it up into something that is as definitive as possible within the constraints of what is a complex (and still developing) area of law.
Here is my shot at it. Please feel free to add, criticise and question. Perhaps it can be placed elsewhere on the site when finished as a collaborative article?
On the specific point regarding means of the non-fault driver and their ability to hire their own car at "spot" rates, my own opinion is that while some insurance companies raise means to pay for a spot hire as an issue in challenging credit hire provision I think (broadly) they only do so as a negotiating tactic.
I have never refused a credit hire on a legally insured case on the basis of the hirer's means to pay for spot hire and I have never lost a case.
In some cases (as outlined below) I might refuse to cover hire on the grounds that the claimant had sole and exclusive rights to an alternative equivalent vehicle but that is a different matter.
I know that some people have lost credit hire cases on the basis of means but looking through them they seem to have occurred in (either) highly unusual circumstances; or the verdict has been reversed on appeal.
In my experience the few companies that still challenge credit hire cases on the basis of the means of the hirer seem to be retained solicitors and barristers using it as a "court steps" negotiating tactic to get the bill down and few such cases progress to final hearing.
As mentioned above I take the risk on paying for any insured cases we would lose and I cannot envisage a case where we would refuse to cover a hire on any case beacause of the means of the policyholder.
Credit hire: proposed FAQ:
What is "credit hire" and when is it used?
Credit hire is the supply of a like-for-like replacement hire vehicle on a credit basis to the not-at fault vehicle owner following a non-fault accident. Rather than paying for the hire of the vehicle at the time of hire, the credit hire company will attempt to recover the costs of hire from the at-fault driver's insurer once the claim is settled. Credit hire may be available to any non-fault vehicle owner whatever their own insurance status - comprehensively insured, third party insured or even (in many cases) uninsured as the claim is not against their own insurance but directly against the the insurer of the at-fault third party driver.
Are credit hire agreements legally enforceable?
Most credit hire law comes from two cases: Clark v. Ardington [2002] EWCA Civ 510 and Lagden v. O’Connor [2003] UKHL 64,
In Clark the court held that a credit hire agreement could be valid, enforceable and exempt from the Consumer Credit Act. If a credit hire agreement complies with the Consumer Credit (Exempt Agreements) Order 1989, then it is likely to be valid. This requires the debt to be paid in not more than four instalments, less than twelve months from the date of the agreement. Most challenges to the validity of credit hire agreements are generally unsuccessful provided the agreements comply with the above and a challenge against an agreement per-se is a rarity. Legal challenges now tend to focus on the circumstances in which the claim is made and the amount being claimed.
Where (and why) do problems with credit hire arise?
From a consumer point of view the problem is that the contract is between the credit hire company and the owner of the vehicle involved in the non-fault collision. The owner of the damaged vehicle enters into a contract whereby they hire the vehicle from the credit hire company on the basis of a credit agreement - with the bill payable at a future date and the costs recovered directly by the credit hire company from the at-fault driver's insurer.
Credit hire works on the basis that the payment will be recovered from the at-fault driver's insurance company and no charge will be payable by the (non-fault) recipient of the hire.
But the contract will usually include a clause which means that if the credit hire company cannot recover from the third party they may have recourse against the recipient of the hire - ie the owner of the non-fault vehicle. Thus potentially the recipient of the hire can be landed with a massive bill if:
-
they (or the driver) are held partially or wholly liable for the accident
-
the hire of the vehicle is deemed too long or unnecessary
-
the recipient of the hire is given a substantially better vehicle (charged at greater cost) than the one that was damaged
-
they fail to adequately assist the credit hire company in bringing a case against the third party insurer.
-
the recipient of the hire has, or (arguably) could have obtained and paid for, an equivalent vehicle to their own on a non-credit basis without suffering any financial burden
All the above scenarios will be discussed in detail below.
Please note that if a credit hire claim goes to court the case will be nominally between the non-fault party (as the claimant) and the at-fault party (and the defendant) -- but most cases will be subrogated to the credit hire company and the at-fault party's insurer who will bear the legal costs and meet any payments resulting from the case.
When is a credit hire possible?
Credit hire should only be taken:
-
if there is no doubt as to liability.
-
for the duration of the period of loss of use of the damaged vehicle. Please note that if the vehicle is safe and drivable this may only be for the period during which repairs are actually being undertaken (see "duration of hire" below).
-
the driver has no other equivalent "spare" vehicle available and without depriving another driver (usually spouse or partner) from using it; and
-
in theory at least, the driver could not have obtained or paid for an alternative vehicle without suffering any financial impediment (ie they had spare money they did not need for anything else).
Why are credit hire rates so high compared to normal rates?
The credit hire industry body argues that while spot hirers take no risk as to settlement by being paid up-front, the credit hirer takes all the risk as to their bill being settled at end of claim - which could be several months hence or in some cases, never. Their charges also need to include an element to cover the costs of the credit and sufficient margin to cover cases where costs are not recovered.
Furthermore they need to have a wide range of instantly-available replacement vehicles to hand and these need to be delivered nationally at all times of day and night.
Credit hire rates are regulated and agreed rates are set by agreement between the credit hire companies and the Association of British Insurers:
http://apps.abi.org.uk/tphire/
They are higher than spot rates but provided that the various other issues dealt with in this FAQ are appropriately dealt with then all participating insurance companies (see above link) should settle claims.
In all circumstances make sure any company you use is "First Tier ABI" - see above link for more information.
How do most people come to use credit hire companies?
Most people are contacted by an "accident manager" having had their details passed on by their own insurer after they informed them of a non-fault accident. "Accident Managers" and "Accident Management Companies" are usually either credit hire companies themselves or they will be referring your case (for a referral fee) to a credit hire company.
Just because your insurer has "referred" you to them does not mean you should enter into the agreement blindly -- nor do you have to accept your insurer's recommendation.
Insurers derive revenue from referral fees paid to them by accident managers who make their money from providing (amongst other things) credit hire vehicles in non-fault accident cases. Generally the accident management companies who get the work from your insurance company will be the highest bidders. They are not necessarily of the highest quality or the most reputable.
If you offered a replacement vehicle following an accident the questions to ask before delivery are:
The answer to the latter should be "only if you deliberately deceive us as to the circumstances of the accident and your personal position."
Otherwise walk away.
Some credit hire companies will cover the entire risk of providing the credit hire (and any loss -- in court if necessary) except in the case of deliberate fraud. Find one of them -- or ask me.
When should I not accept a credit hire vehicle?
-
If there is any doubt as to whether the other party is 100% liable.
-
If the damage was minor and your vehicle is drivable (you will not be entitled to a hire vehicle except for the actual period during which the repair is undertaken).
-
If you have an equivalent vehicle you would not otherwise be using (and would not be depriving another person of using - such as your spouse or partner's car)
-
arguably, if you have the means to hire an equivalent vehicle for the full period necessary without suffering any deprivation (deprivation being in the legal sense - that you had no other possible need/use or future use for the money).
What is the difference between a credit hire vehicle and a courtesy car?
A credit hire vehicle might be hired to you following a non-fault accident by a credit hire company. It is normally provided on a "like for like" basis following loss of use of your own vehicle and payment is subject to a credit agreement which you enter with the credit hire company. If all goes well the payment for the hire should be recovered directly by the credit hire company from the insurer of the at-fault driver(s). In some circumstances you could be liable for any charges made under the agreement that they cannot recover.
A "courtesy car" may be provided while your car is repaired and may be funded by your insurance policy or by agreement with the third party insurer. Courtesy cars are normally "stock" vehicles often provided by the repairing garage. They may be offered following non-fault, split liability and at-fault accidents. In the case of split liability and at-fault cases they may be costed into your claim on your comprehensive policy and hence might be chargeable against your policy excess.
-
Be wary of accepting a credit hire care if liability is in any way in dispute.
-
Unless you have specific cover always question if there will be any cost implication of a "courtesy car" if the accident is likely to be split liability or you might be found to be at fault -- particularly if the cost of repair(s) is close to your policy excess.
-
Always declare any entitlement to a "courtesy car" to the credit hire company - even if you were not at fault in the accident and the car on offer as a courtesy car is not "like for like".
I was in an accident which was not my fault. Am I entitled to a replacement vehicle?
Generally speaking the law provides that if you suffered damage or injury wholly caused by another person you should not be disadvantaged in any way.
However the law says your need for a replacement vehicle is not a given. In most circumstances showing the need will be easy to satisfy but you may not be entitled to a replacement vehicle if it can be shown that yours was not needed for the period of repair.
Circumstances where this might apply might include:
-
if you were to be on holiday abroad and the vehicle concerned was to be parked up for the entire period of the repair.
-
if your car was damaged but you had another of equivalent quality available for your sole use parked in your garage
The need for a hire car is not self-proving (Giles v Thompson [1994] 1 AC 142 per Lord Mustill at 167).
However a need for use is no defence in these circumstances. If you can show a potential requirement for use -- ie that you may have wished to use the vehicle but could not as no car was available (or did not even if one was) then the loss of potential use is likely to be enough.
I was in an accident which was not my fault. Am I entitled to a like-for-like vehicle?
Generally speaking the law provides that if you suffered damage or injury wholly caused by another person you should not be disadvantaged in any way. Thus if you drive an Aston Martin which is damaged in a collision which is not your fault then you should should be provided with a vehicle of equal prestige and not asked to accept the body-shop's Micra while yours is off the road.
The converse equally applies. If your Micra is damaged and a credit hire company offers you an Aston Martin the insurer of the at-fault driver cannot be expected to pay the additional hire costs. Falsely "upgrading" you is a well established scam. Never accept a credit hire vehicle which is better than the vehicle it is replacing unless the hire company guarantees in writing that it will be charged to the third party at the same rate as your own vehicle. Failure to do so can leave you picking up their bill.
On like for like" be aware that the entitlement to claim for an equivalent vehicle is not unlimited.
From the Law Society Gazette:
In Boardman v Byrne [2008] Lawtel (Walsall CC, 18 April 2008), Mr Boardman owned a Porsche GT3. He claimed that it was a very rare car, which personified a certain image of wealth to the outside world (insert your own view as to the image conjured up). An ‘ordinary’ Porsche 911/966 would not, in his opinion, have been an adequate substitute. His Porsche garage did not have a GT3 and referred him to Accident Exchange Ltd who supplied him with a Mercedes Benz SL55 AMG at £675 per day.
The court found that if Mr Boardman had given the matter any thought – which he didn’t in fact – then he would probably have hired the best available Porsche car and his stance about ‘lesser models’ was unreasonable. He recovered the average ‘spot hire’ rate for a Porsche 911/966 of £253 per day.
The claimant is entitled an equivalent vehicle (Lagden v O’Connor [2004] AC 1067 per Lord Hope at paragraph 27).
Whether you can hire another vehicle on credit hire is another matter (see: hire rate and impecuniosity (below).
Credit Hire Cases: Permitted duration of Hire
Even if you were not at fault if your vehicle suffered only minor damage (so as not to render it unusable, dangerous or illegal) then the only period for which you can claim a credit hire is for the period in which it needed to be off the road to be inspected and/or repairs to be actually undertaken. If you are offered a credit hire for a minor bump (such as parking damage) bear this in mind and if the accident management or credit hire company says otherwise you should refuse to deal with them.
If your damage was more substantial then the repairs must be conducted in a timely manner. It may be / is in the interest of the Accident Manager to delay repairs as much as possible so as to extend the period of the credit hire and hence their fees/commission. Furthermore repairers routinely charge insurers storage fees and are often dependent on the accident manager so are happy to participate in delaying the work being undertaken. If you have any suspicions that the repair is being unreasonably delayed place the accident management company on notice of your concerns immediately in writing and if the problem persists send a copy letter outlining your concerns to the third party's insurer. If you acted reasonably in placing your vehicle with what appeared to be a reputable firm then they can seek a contribution from the accident manager and garage and you will almost certainly not be adjudged to be liable for the hire costs resulting from the delay.
In the case of a more substantially damaged vehicle which has been repaired the vehicle should be collected immediately and the credit hire car returned or you will be liable for the daily hire rate. Only a claimant who was unable to pick up his vehicle straight away giving a specific, good reason – such as being away on business in the hire vehicle – is likely to succeed in avoiding personal hire charges.
Credit Hire Cases: Permitted duration of hire for written off vehicles
When a vehicle is written off, other complexities may arise. I work on the basis that the acceptable hire period is from the date of accident to the point at which the settlement payment is received.
But arguably the non-fault driver's means to pay comes into play in this area. For example if the non-fault driver can afford to buy a new vehicle from his own means straight away then a hire period longer than a few weeks might be argued to be unjustified - but assuming fault is admitted then the same arguments apply as to why the insurer has not settled the claim in a reasonable time period.
Thus although this is considered to be an issue elsewhere (and hence mentioned) as with "credit hire and means to pay" (below) we have never lost a case on it.
Hire Rate: Credit Hire and Means to Pay for Spot Hire - so-called "Impecuniosity"
Those of us who are of the view that some insurers have deep pockets and very short arms might have their opinions buttressed by the latest wave of cases troubling the courts concerning "impecuniosity".
The law regarding credit hire - what is recoverable and what is not - is pretty much established along the framework I have outlined above: Broadly speaking if you are a non-fault claimant you are reasonably entitled to a replacement vehicle to the equivalent of that which you lost for the period you reasonably have it.
The only question remaining is as to how the replacement is provided and when, who and how someone pays for it.
As I have detailed above most insurers are very happy to accept substantial kickbacks from firms buying their non-fault personal injury claims and credit hires but some shout very loudly and head in the direction of court when they are the insurer of the at-fault party and a similar claim is made against them.
Central to this issue is who pays - and when - for your replacement car when another driver puts you off the road?
As things stand if you can be shown to be "impecunious" - ie you don't have any money or spend too much of what you earn or have - the chances are you can have a credit hire and the other party's insurer will be forced to pick up the bill without a problem.
Similarly if you drive a prestige, rare or expensive model then current case law falls in your favour.
The people left fall into the middle ground are careful, saving types with a job, a fair credit history and a standard, widely available vehicle.
At risk of sounding like the Daily Mail much of "honest and decent" middle England.
As some lawyers have it while the courts will accept that "impecunious" and/or the wealthy (but not the very wealthy) will reasonably have a credit hire vehicle provided at no risk to them, most of the population who are crashed into by a third party and not at fault will be expected to hire their own replacement vehicle at spot-hire rates, pay for it from their own resources or using their own lines of credit and then claim any costs back - possibly months, maybe years later - from the at-fault party's insurer should they (finally) admit liability.
I do not accept that this is or should be the case and it is not the basis on which our legal insurers work in providing a replacement vehicle in the event of an accident.
We have never yet lost a credit hire case on the basis of means and I do not expect to do so in future. The relevance of means is one of the few areas of credit hire law to have yet been definitively tested by the courts. However my view is that the means of the claimant are irrelevant and they do not figure in our own assessments as to whether we will fund a vehicle.
These are:
-
if the accident is non-fault you will always receive a vehicle to the equivalent standard to which you lost.
-
your means are irrelevant to us. We will provide a replacement vehicle on a "no risk to you" basis as long as you are honest about the circumstances surrounding your case (see 3. below).
-
unless there is deception or attempt to mislead involved as to the circumstances of the accident in any case we deem to be non-fault you will never be billed in any way. We will meet the full cost of provision of the equivalent replacement vehicle to that which has been damaged at no risk or charge - and irrespective of means - throughout the period where we deem you lost use of the vehicle until such a time it is deemed repaired or is written off by the third party insurer.
For more information go to http://www.autosure.eu
Other common questions:
Credit hire case: Why am I named as defendant or claimant?
As with all aspects of a road traffic accident the claim is between the parties to the accident. Thus even if your insurance company (or another party) is fighting the case on your part they may well be doing so on a subrogated basis. This means they incur the costs and risks of the action but they are not named as a party to it on a formal basis.
Credit hire case: what is my risk of having to pay a credit hire bill personally (I was at fault),
Almost none – unless you were uninsured. You may well be named as a defendant in a case which is why this question arose. But your case is likely to be subrogated and any legal costs or costs or penalties imposed by the court met by your insurer. We usually see these cases when there is a minor collision when the owner of the other vehicle has been provided with a credit hire they did not need at great cost. If they are using a bad credit hire company then the financial risk to them is far greater than it is to you. Send all information received to your insurance company. If you feel you need assistance or wish to have free, private consideration of your case contact me through the "ask Lucy" section of this website.
Credit hire case: what is my risk of having to pay the credit hire bill (they were at fault)
Any reputable hirer – and that does not necessarily include the largest or best known – will provide the hire car at their risk. You should only face risk of personally covering it if you have misled them in any way. Regrettably credit hire is sufficiently profitable that many bad practices have developed. If you should not have been provided with a credit hire vehicle in the first place because the degree of damage did not warrant it, if the repair was unreasonably delayed, if a better vehicle was provided than that which was damaged or if you were found to be responsible you may be asked to pay all or part of the costs of hire.
Credit hire case: Questions regarding means, payslips, bank statements and credit card bills
My view is your means are irrelevant in almost all cases. Contact me via Ask Lucy (on this website) if you wish me to consider your case in detail.
Edited by LucyBC on 31/08/2010 at 19:53
|
