If you are involved in a road traffic accident that was not your fault, and are deprived of the use of your vehicle, you might be lucky enough to find that the other driver’s insurer offers to pay for a replacement vehicle for you. Alternatively, you might have cover under your insurance policy or you might be in a position to pay a hire company and seek to recover the cost from the driver that caused the accident.
Credit hire is a phrase that is becoming more and more commonplace in insurance litigation. Some people may never have heard of credit hire. For those unfortunate enough to have been involved in an accident that deprives them of their vehicle, they may be well aware of the term.
If the innocent driver involved in a car accident needs a replacement vehicle, but can’t afford to pay for the cost of hiring one, they may hire from a credit hire organisation. This would involve the owner of the damaged vehicle entering into an agreement for a replacement vehicle provided on credit, with the cost being sought from responsible driver’s insurance company. The recovery of the charges are generally pursued from the insurer, and the hirer of the vehicle rarely requires to pay the charges. However, and importantly, when the hirer signs on that dotted line, they become personally liable for the charges.
Because the cost of credit hire is sometimes greater than hiring from a high street rental company, insurers and credit hire organisations have become embroiled in a number of court actions to establish what exactly is recoverable.
Some of the most common defences to a credit hire action are:
- Impecuniosity. A word rarely used by the public at large but used daily by lawyers involved in credit hire cases. It basically means “without money” or “penniless”. Therefore, we have to consider whether the pursuer (the individual who owned the damaged vehicle) could have paid for the hire costs up-front from a high street hire company and recovered the hire charges from the responsible party? Generally, clients will be referred to a credit hire company by their insurers and do not always appreciate that the vehicle is actually a hire vehicle and not a “free” vehicle provided under their own insurance policy. However the court will consider whether the Pursuer had sufficient money to hire a vehicle using their own finances. If they did, but instead hired on credit, the rate recoverable may be less than the credit hire rate. It would then be for the responsible party’s insurers or their solicitors to show that the Pursuer could have hired a vehicle at a lower rate from a company such as Hertz, Enterprise etc…. The courts expect an impecunious pursuer to show their financial position at the time of entering into hire through bank, savings and credit card statements. Therefore the innocent client will often have to disclose this information in a credit hire case.
- The type of vehicle hired was of a higher standard than the pursuer’s own vehicle. Or the vehicle hired was newer, and therefore better than the pursuer’s own vehicle.
- The period of hire was excessive – for example the repair period was estimated at 4 days, but took 3 weeks. The pursuer is under a duty to mitigate their loss. This can be proved by showing regular contact with the repairing garage, and that any delay was out of the pursuer’s control.
- Enforceability of the credit hire agreement – a technical point on the drafting of the credit hire agreement that has been largely eradicated following the case of Dimond v Lovell  1 AC 384. However insurers are often looking for new ways to challenge the agreements entered into by the innocent motorist.
It can be a confusing time for clients after being involved in an accident, with calls from various different parties offering assistance. Credit hire is no different, however Jackson Boyd have experience in dealing with claims of this type and can guide you through the process.