Written by Spencer Pascal
The provision of hire cars on credit by hire car companies to not-at-fault drivers involved in motor vehicle collisions has dramatically increased over recent years. Insurers of at-fault drivers are regularly left with the task of having to assess the reasonableness of these claims when demands are eventually made by the credit hire car company. Quite often the demands that are received are for exorbitant amounts exceeding that charged by mainstream hire car providers such as Hertz or Europcar.
Credit hire car claims can be defended on many fronts. It is therefore of critical importance insurers have appropriate systems in place to properly vet and assess these claims. Some of the questions we see being commonly asked when scrutinising demands received for credit hire car charges include:
- Shouldn’t the not-at-fault driver have availed themselves of a free hire car option under their own insurance policy rather than hiring a vehicle on a credit basis?
- Shouldn’t the not-at-fault driver have accepted an offer of a free hire car from the at-fault driver’s insurer rather than hiring a vehicle on a credit basis?
These are important questions to consider when determining whether a not-at-fault driver has acted reasonably when hiring a vehicle on credit or whether the not-at-fault driver has failed to mitigate their loss.
The Starting Point
The seminal decision handed down by the High Court of Australia in Arsalan v Rixon; Nguyen v Cassim[1] found not-at-fault drivers are generally entitled to hire a substitute vehicle that is broadly equivalent to their damaged vehicle. In reaching this decision, the Court indicated a not-at-fault driver is entitled to be compensated for both the physical inconvenience of having lost the use of their vehicle (i.e. being able to travel from A to B) as well as their “loss of amenity” (i.e. their loss of the pleasure and enjoyment) through not having access to their vehicle.
The High Court’s decision did not consider a not-at-fault driver’s failure to mitigate in the context of the commonly posed questions mentioned earlier. It therefore remains open as to how lower Courts will adjudicate on these points.
Shouldn’t the Not-at-Fault Driver Have Availed Themselves of a Free Hire Car Option Under Their Own Insurance Policy?
The natural response would be that surely it makes more sense for a person to make use of a hire car provided by their own insurer rather than personally incurring a liability. The Courts, however, have been reluctant to apply such logic.
In the recent Victorian Magistrates’ Court decision of Kinkead v Rositani 2, Magistrate Hoare was required to determine a number of issues arising from the hire of a vehicle on credit. One of those issues was the reasonableness of the Plaintiff’s conduct in hiring a vehicle on credit when the Plaintiff’s own comprehensive insurance policy included provision for a hire car. Magistrate Hoare did not consider the Plaintiff had acted unreasonably. In reaching this decision, Magistrate Hoare noted the following:
“There is of course, a long line of established authority…to the effect that a plaintiff’s insurance arrangements cannot be taken into account to reduce a tortfeasor’s liability.” [3]
‘In my view, a finding that Mr Kinkead has, [as] a matter of law, acted unreasonably in not minimising loss by claiming under his own policy would be inconsistent with the long line of authority’ [4]
In reaching the above decision, the Court referred to the legal principle of res inter alios acta which in this context means a tortfeasor cannot require the injured party to invoke his contract with his insurers in order to mitigate their loss. Whilst the decision of Kinkead is not binding and is limited to its facts, it is presently difficult to argue a not-at-driver has failed to mitigate their loss by electing not to take up a hire car option under their policy.
Shouldn’t the Not-at-Fault Driver Have Accepted an Offer of a Free Hire Car From the at-Fault Driver’s Insurer?
In contrast, Courts have shown a greater preparedness to consider an offer of a hire car made by the at-fault driver or their insurer to the not-at-fault driver when considering the reasonableness of the not-at-driver’s conduct to hire a vehicle on credit and their subsequent failure to mitigate. Justice Emmett arguably alluded to such an argument when delivering the majority Court of Appeal judgment in Lee v Strelnicks[5] when he stated:
“One can envisage circumstances where a wrongdoer had available a vehicle that was equivalent to the damaged vehicle. If that equivalent vehicle were made available for use by the claimant while the damaged vehicle of the claimant was being repaired, the relevant “need” of the claimant would be satisfied.”[6]
Such an approach has found favour with the Courts in the United Kingdom.
In the England and Wales Court of Appeal decision of Copley v Lawn[7], Lord Justice Longmore indicated if an at-fault driver or their insurer offers the not-at-fault driver a hire car it may be unreasonable for the not-at-fault driver to reject or ignore that offer so long as the offer makes clear the cost of hire to enable the not-fault driver to make a realistic comparison with the cost of proceeding to hire elsewhere. Ligeti Partners has successfully defended claims using this reasoning in the past. Our firm reported on one such instance last year (Jing Zhang v Graham Ellis NSWLC 2021) where the Court was prepared to find the not-at-fault driver had acted unreasonably by rejecting an offer of a hire car from the insurer of the at-fault driver. The question then becomes how should the not-at-fault driver’s loss be assessed? There are competing views. In the United Kingdom, it appears the current approach is that a not-at-fault driver is entitled to recover, at least the cost, which the at-fault driver or their insurer can show they would reasonably have incurred, which in most instances is significantly below the credit hire charges.
Implications
Ligeti Partners works closely with insurers to help implement early and effective intervention strategies addressing the issues raised in this article to reduce an insurer’s exposure and to ensure insurers are availing themselves of all defences when challenging the reasonableness of credit hire car charges.
Should you wish to discuss this area in further detail, please contact any member of our Credit Hire Team.
