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When will the ripples in the credit hire market dissipate?

The ripples caused by the CMA’s failure to tackle the behaviours of some CHOs and the favourable outcome for insurers in the case of Stevens v Equity continue to be felt in the credit hire arena. In recent months, two signatories of the GTA (Helphire and Elite Insurance) have left and one specialist credit hirer - Bikers Legal Defence (BLD), has gone into administration while Accident Exchange (AEX) have threatened to extend their investigation into cases where basic hire rates (BHR) evidence is relied upon - citing Autofocus type practices. Partner and head of the DWF Credit Hire team, Gavin Perry, looks at events in the credit hire marketplace over the last few months.

Ripples in the water

As Andy Watson, CEO of Ageas said at the launch of the second in the series of the ABI’s “Next steps in tackling the compensation culture” events, one of the unintended consequences of the CMA’s failure to tackle the issues in the credit hire market place was to effectively give CHO business models a “seal of approval”. Indeed were it not for the judgment in Stevens v Equity earlier this year, there would have been a danger that CHOs would now be running amok in the market place. The effect of the judgment in Stevens has been to act as a bulwark against CHOs, giving them pause for thought, and no doubt assisting insurers’ arguments in the GTA rate negotiations, resulting in a rumoured 5% rates cut.

The fact that BLD have gone into administration is surprising given their USP as a provider of motorbikes on credit hire, set alongside the fact that it is not easy to obtain BHR rates for the hire of motorbikes outside of the South East, which would have left them relatively unscathed by Stevens. It seems possible that they will rise phoenix like, free of any historical debt issues, or instead their business could be a neat bolt on for one of the major players, providing access to a niche market.

The departure of Helphire from the GTA did not cause the implosion that was mooted by some. The reality is that many insurers and CHOs view the GTA as “better the devil you know” militating against a lack of resource to cope with the frictional issues that the demise of the GTA would bring.

AEX's approach

The Court of Appeal’s conclusion in the AEX case of Stevens that in cases where the claimant is not impecunious the court must award the lowest available general hire rate, has led to a response from AEX. Having previously relied in their cases on BHR evidence that came from their linked company - APU, which was supportive of AEX rates (though showing a broad spread of rates with many much lower rates), AEX stopped taking that approach at the point that the Court of Appeal adopted the rate provided by APU to calculate the lowest hire rate in Stevens. Instead, APU have started producing statements which “rebutted” the defendant’s hire evidence, and so resulting in the need for insurers to obtain rebuttal evidence.

Courts will of course be alive to the fact that the evidence of APU (rebuttal or otherwise) is not independent, but the irony is not lost on the marketplace, that at the point where APU’s evidence was no longer helpful to AEX’s cause, it was withdrawn.

Now Steve Evans, CEO of AEX has said that APU have launched a further investigation into use of BHR evidence after reviewing more than 100 statements regarding the cost of hire deployed by insurers in the last month or so. He said that he would be writing to a number of solicitors and insurers in the week commencing the 31st August, but we are not aware of anyone having received a letter as yet.

In existing cases, AEX are issuing witness summonses against some rates providers, presumably with a view to testing the provenance of the rates evidence being produced by those providers. However, given the amount that would have to be tendered to each witness in expenses (train fares/travel/loss of earnings or revenue etc.) alongside the possibility of Steve Evans who signs the rebuttal statements then being summonsed in every case in response, may mean that AEX, as well as the courts tire of this approach quickly.

AEX is facing a further Court of Appeal challenge in April next year in the case of Thwaites v Aviva, this time on the applicable BHR rate where the claimant possesses an “Ooops policy” and one wonders whether this is a case that AEX can afford to lose.

A potential solution to the credit hire issue?

Perhaps the solution to all this lies in more insurers offering their policyholders a free hire car, as Direct Line recently announced that it would be doing for all its comprehensive policyholders. Ironically, in a way this is a similar approach to one that the CMA advocated, albeit, it would appear that Direct Line comprehensive policyholders will be offered a free hire car, as of right, rather than having to pay extra for the privilege.

One question arising from a change of this type is whether repair costs will reduce, given that garages’ courtesy cars will become redundant? In reality, as with credit repair in non-fault cases, this may just be pushing costs off the bottom line.

How though will recovering those costs through an insurer’s right of subrogation work?

In particular, a point to consider from this type of approach is whether a difficulty may arise for an insurer offering this service to policyholders, who are then involved in accidents with uninsured motorists (or motorists who become uninsured). Recent changes to the MIB’s Uninsured Drivers Agreement mean that, post August 2015 any claim which has insurance in the background will be deemed subrogated, whether a claim had been made on the policy or not.

Clause 6 of the Uninsured Drivers Agreement has been amended so that the MIB (or an insurer standing in their shoes) can now exclude payment in those instances where the claimant “has received, or is entitled to receive or demand, payment or indemnity from any other person (including an insurer)” and the exclusion extends to those instances where any insurer does not provide payment or indemnity because:

  • The claimant chooses not to make a claim under that policy

  • The claimant makes a claim outside of the stipulated timeframe for doing so, or

  • The claimant incurs a liability, but could have avoided doing so by making a claim

Whilst we have always proceeded on this basis and had success, it does clear up an area of ambiguity. Now the MIB or an Article 75 insurer would appear to be entitled to exclude those claims that are made where the claimant has insurance against those losses, for example:

  • Those credit hire claims where the claimant is entitled to a replacement vehicle under their own policy – particularly if that replacement vehicle is ‘like for like’ (where it isn’t there may be arguments about the difference in cost between the two)claims for credit repair, where the claimant had comprehensive insurance at the time of the accident

  • Those credit hire claims where there was a policy of insurance that indemnified the claimant against the costs of the hire claim – per the AEX model (see W v Veolia) and the DAS model (see Bee v Jenson). Whilst some of these policies cease to provide cover where it transpires that the negligent party is uninsured, where the hire claim has crystallised before it has been established that the negligent party isn’t insured, that might still allow the MIB or an Article 75 insurer to argue that the claim should be exempt on the basis that the claimant didn’t make a claim on the insurance cover whilst the opportunity to do so was still there to do so.

So the MIB and an Article 75 insurer is now able to essentially treat those claims where insurance is present, but no claim is made upon it, as subrogated claims, whereas previously arguments had been advanced to suggest that when the insurance had been there but the fact that no claim was made upon that insurance, did not bar the claimant from making a claim under the Uninsured Drivers Agreement.


We expect that there will be further disruption in the credit hire market place, with potentially other CHOs going the same was as BLD and potentially more departures from the GTA. We would certainly be surprised if there wasn’t more friction in credit hire claims, at least over the rest of this year and insurers can expect the disruption in the credit hire space to go on for some time.


For further information about this piece, or for a discussion about credit hire issues generally, please contact Gavin Perry on 0151 907 3493 or by email gavin.perry@dwf.co.uk

To find out about the changes made to the Road Traffic Act by the Deregulation Act, which affect an insurer’s ability to become an Article 75 insurer, read our update: The Deregulation Act removes the red tape but not the need for careful consideration

By Gavin Perry

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.