Credit hire and COVID-19

01 Apr 2020

As the COVID-19 pandemic continues to affect all areas of our lives, an area of litigation that warrants consideration at this time is credit hire claims. In a timely revision of the Civil Procedure Rules, the 113th update – entering force on 6 April [see CPR, 16 PD] – includes specific provisions dealing with the “hire of replacement vehicles following a road traffic accident”, which reinforce the requirement for claimants to plead to specific matters: (1) the need for the replacement vehicle; (2) the period of hire claimed; (3) the rate of hire claimed; (4) the reasonableness of the period and rate of hire; and (5) impecuniosity, where relied upon.

Whilst many are following the Government’s advice and “stay[ing] at home”, there will invariably be fewer vehicles on our roads reducing the likelihood of road traffic accidents, which should lead to fewer bona fide claims (no doubt compounded by the difficulties credit hire organisations (CHO) may experience mobilising fleet during lockdown). Nonetheless, the value of those claims intimated is expected to rise owing to increases in the periods replacement vehicles are out ‘on hire’, for example because inspections and/or repairs cannot be completed, albeit consideration should be given to whether desktop inspections have now become attractive.

Compensators should, therefore, be prioritising claimants based on their need, with key workers being ranked over claimants who are furloughed or working from home because premises are temporarily closed. As a consequence of schools being closed, limited non-essential travel could readily be resourced where claimants’ households already have access to a single vehicle.  Whilst the question of need has, historically, been a relatively low threshold, this pandemic means that defendants should once more be scrutinising claimants’ needs to enter hire.

Arguably, the case for insurers to promote intervention to claimants – per (1) Copley v Lawn / (2) Maden v Haller [2009] EWCA Civ 580 – has never been stronger. Those with established repair networks that are, even partially, operative may be best placed to offer (i) replacement vehicles for (prolonged) hire, or (ii) repair services; even temporary repairs may allow claimants to return to the road, pending more permanent solutions. Where claimants’ vehicles remain roadworthy, then any hire period should be limited to the repair period only and, in light of the prevailing circumstances, it is arguable that entering into hire before a garage is able to undertake any repairs is entirely unreasonable, resulting in damages being limited accordingly.

Compensators with, currently, no functioning repair or hire network might consider making a global offer for the loss of use claim, or exploring the commercial costs of cross-hiring vehicles or procuring taxis to cover ad-hoc trips for high priority claimants such as key-workers. Note that whilst many larger garages have temporarily closed and are furloughing their workforce, many smaller self-employed garages are operating with business as usual.

Finally, with many UK businesses experiencing cash-flow worries, credit hire companies appear much more amenable to accepting commercial offers, not least because a number of compensators have temporarily suspended interim payments leading to reduced settlements. As previously indicated, with the value of claims expected to spike, owing to extended periods of hire, compensators should ensure that well-pitched Part 36 offers are made to either avoid litigation entirely or provide them with sufficient costs protection, given that COVID-19 hire claims will likely exceed the small claims track threshold.

* BLM’s motor practice is well placed to provide specialist legal advice to our clients. Please do not hesitate to contact a member of our market-leading practice group for further information.

Kerris Dale - kerris.dale@blmlaw.com
Sarah Cartlidge - sarah.cartlidge@blmlaw.com
Verinder Bedi - verinder.bedi@blmlaw.com

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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Sarah Cartlidge

Sarah Cartlidge

Partner,
Manchester


Kerris Dale

Kerris Dale

Partner, head of office and head of motor,
Cardiff


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