News focus: Under the bonnet of credit hire charges

When taxi driver Tariq Mehmood suffered a car accident in Wakefield in 2016, his replacement car hire claim ended up coming to £107,000, based on hiring a replacement plated taxi for 456 days, at a daily rate of £195 plus VAT. The total amount claimed was, according to His Honour Judge Malek in Mehmood v AIG Europe Ltd & Anor, published this week, an ‘extraordinary sum’, in the context of a vehicle itself worth only £2,190.

The judge ruled that Mehmood had not acted reasonably and awarded less than £1,000 – subject to adjustment based on his established contributory negligence.

It was a reminder that the credit hire industry and the potential for very high charges remain hugely contentious, despite the Ministry of Justice appearing to be satisfied that its intervention is not required. After imposing tariffs for personal injury claims worth less than £5,000, the government backed away from similar constraints on credit hire. It announced last year that the best approach was to continue to work with stakeholders to monitor the existing voluntary agreement between insurers and hire companies.

But government inaction will not be emulated by insurers. Many in the sector were buoyed last week by a High Court ruling that a claimant demanding credit hire payment should have to disclose basic information about their financial status.

The established principle of impecuniosity has long been a key battleground. If a claimant is deemed to be impecunious – in effect lacking access to finances to source a replacement vehicle upfront – then they can claim full credit hire charges. The question in Holt v Allianz, reported last week, was whether claimants should be required to disclose financial details – bank statements, credit card statements – before or after proceedings have been issued.

The dispute may appear small but the upheld decision of His Honour Judge Harrison is being hailed by insurers as significant. The judge had granted Allianz’s application for early disclosure, adding that claimants in credit hire cases ‘should not be able to avoid the issue of impecuniosity by saying that [they] do not deal with the issue at a pre-issue stage’.

Defendant firm Keoghs, which represented Allianz, said the ruling was highly significant, upholding requirements that credit hire organisations must properly address the issue of the claimant’s finances at a pre-litigation stage.

The firm said the judgment represented the culmination of a six-year strategy to enforce requests for impecuniosity disclosure before litigation proceedings begin. Partner and head of credit hire strategy Gary Herring said: ‘We would expect the unhelpful practice by some large credit hire organisations of avoiding addressing the issue of impecuniosity at the pre-litigation stage, to immediately stop.

‘A more transparent approach to this issue at an early stage, as is robustly endorsed by this judgment, should have a significant impact in terms of reducing the volume of contested litigation and remove a large element of cost from the process.’

However the claimant sector does not seem to share insurers’ belief that Holt will bring about a sea change. Anthony Hughes, chair and chief executive of the Credit Hire Organisation, said the principle of declaring impecuniosity at the start of proceedings can be helpful in narrowing the issues at an early stage and enabling all parties to reduce friction and minimise disputes.

He added: ‘Ultimately, insurers and credit hire companies serve the same customer; our primary aim is to provide them with access to mobility so that they can get on with their lives while their own vehicle is off the road, and that we settle the claim with the at-fault insurer with the minimum of hassle. Holt v Allianz may have provided a further opportunity to do just that.’

Hughes said he hopes the issue will be explored further as part of joint work updating the voluntary protocol. The industry on all sides faces major challenges in the coming years as electric and automated vehicles become more prevalent, and there is general agreement among claimants and insurers that self-regulating these issues is much better than encouraging the government to interfere.

Hughes said the ‘wild west’ days of 20 years ago are long gone, not least because so much of the credit hire industry is itself run by insurance firms. The intention now is to ensure as few cases as possible end up in court. Six-figure claims following a crash involving vehicles worth a fraction of that sum are unwelcome for both insurers trying to keep costs down and credit hire chiefs keen to avoid the MoJ looking under the bonnet.

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