Ruling to put the brakes on runaway credit hire charges

A leading lawyer has said that insurers need to “stand firm” and resist credit hire firms running up huge bills for replacement vehicles.

The call came following a court judgement law firm Keoghs believes will have put credit hire companies on notice that they will no longer be able run up huge sums by allowing claimants to use replacement vehicles for extreme periods.

Insurer Aviva and law firm Keoghs were successful in a case heard at Nottingham Crown Court in which the claimant had sought to recoup the costs of using a replacement vehicle for nearly three years.

The claimant had said that in the 2016 accident her vehicle had been hit by another car that reversed into the road from a driveway. However, a judge found that the claimant had hit the defendant’s car which was stationary at the side of the road.

Meanwhile the claimant had hired a replacement vehicle for 2 years and 9 months, at a total cost of £400,000. Under the ruling the insurers can recover the costs from the claimant who will also face paying the hire fee costs.

Stark warning

Melanie Mooney, the partner at Keoghs who represented Aviva said the judgement sent a “stark warning” to credit hire companies who fail to take a reasonable stance and “blindly” continue to provide a vehicle at significant cost.

She said it was “a reckless decision” by the hire company to allow hire charges to carry on for nearly 3 years “without thought or a care to the potential cost to the innocent motorist in terms of increased insurance premiums”.

Mooney added: “Insurers need to take a firm stance on cases like this and demonstrate that it won’t be tolerated. The costs to be recovered from the claimant, aside from the hire charges for which she is responsible, will be significant.”

John Gibson, motor services director at Keoghs, said the ruling may have an ongoing impact on the sector.

“Insurers are being pressured to making decisions potentially against the best interests of their policyholder due to the large ongoing hire claims,” he said.

“We have to ask what are the checks and balances of a vehicle provider or solicitor for a case of such extremes to ensure an individual who is ultimately liable for them can pay the charges if they are unrecovered. It is akin to what the financial sector faced with credit card or loan payments.”

Richard Hiscocks, director of casualty claims at Aviva, said, “This is one of the most astonishing credit hire claims we’ve seen in some time, and highlights just how far credit hire organisations are willing to go to pursue profit at the expense of honest customers.

“This case highlights an important issue as to whether claimants should bear some responsibility for mitigating their losses. In this instance, we paid the excess on a without prejudice basis to enable the claimant to mitigate their loss. This offer was rejected, which ultimately led to the £400,000 hire invoice, plus costs, for which the claimant could now be personally liable.

Hiscocks explained that ”challenging cases where costs have escalated out of all control is the right and responsible thing for us to do”. He said that Aviva has a responsibility to its premium paying customers to keep our costs low, which ultimately helps reduce pressure on insurance premiums.

Gibson added that there is now an apparent increase of cases of this nature with Keoghs having 25 case with sums of over £100,000, four of which are over £200,000.

Limited options 

For the unsuccessful claimant she now faces a significant bill both for the costs of the case and the hire charges. Gibson said there would have been limited options for the claimant to protect herself again the costs of her case’s failure.

“That would depend on what policies are available, an individual can purchase an ATE (After The Event) policy the point of hire that would cover them for unrecovered charges if it is provided, but in my experience this is very unlikely. It is of course up to a hire company if they pursue the hire charges; this again links to the point of who is the beneficiary in such a case and who is driving it.”

Richard Hiscocks, Director of Casualty Claims, Aviva, said, “This is one of the most astonishing credit hire claims we’ve seen in some time, and highlights just how far credit hire organisations are willing to go to pursue profit at the expense of honest customers.

“This case highlights an important issue as to whether claimants should bear some responsibility for mitigating their losses. In this instance, we paid the excess on a without prejudice basis to enable the claimant to mitigate their loss. This offer was rejected, which ultimately led to the £400,000 hire invoice, plus costs, for which the claimant could now be personally liable.

“Challenging cases where costs have escalated out of all control is the right and responsible thing for us to do. We have a responsibility to our premium paying customers to keep our costs low, which ultimately helps reduce pressure on insurance premiums.”