Introduction
In the leading case of Patti v First Central Insurance Management Ltd (2019) EWHC 2413 (QB), the High Court announced a very important decision on the recoverability of credit hire charges as a special damage. The choice is important for claimants who must obtain a new car after an accident, with bankruptcy terms to be rented. In this post, we will discuss the facts of the case, the legal groundwork, the judgment of the court and it’s far reaching ramifications.
Background of the Case
The case was initiated by a Mr. Patti, who hired a replacement vehicle on credit terms after being involved in a car accident. The claim was fought by First Central Insurance Management Ltd who asserted that the credit hire charges were unrecoverable. The issue went to the High Court for consideration as to whether these charges were recoverable as special damages.
Legal Context
A credit hire charge will arise when a claimant hires a replacement vehicle post-accident on credit, rather than paying for it up front. The dollar value of these charges can be significant, and they are often the source of contention between claimants and insurers. Quantifiable monetary losses arising from an incident, such as vehicle hire are described as special damages. Such charges are historically controversial as to recoverability. Decisions in a series of precedent cases have produced interpretations which are not consistent with each other and it is important to understand what the present position is in relation to whether credit hire charges fall within the definition of special damages.
Criteria for Recoverability:
Genuine Need: The claimant must show they genuinely needed a replacement vehicle. This involves proving the necessity based on their circumstances, such as dependence on a vehicle for work or personal reasons. Reasonable Action: The claimant’s decision to hire a vehicle on credit terms must be reasonable. This includes showing that hiring on credit was a sensible choice given their financial situation and available options.
Analysis of the Decision
The ruling by the High Court has serious consequences for both claimants and insurers. This ruling will realize all of the benefits that ought to have been expected by claimants — a clear direction for how they are entitled to recover (where reasonable) credit hire charges in a context free of the compulsive urgency they are not unfairly obliged with the costs so that, on firm and fairly rewarding its requirement, it is being given in the same manner on a genuine need. It serves as a note to specify why a replacement vehicle is required and how the credit hire decision is a reasonably one.
In the context of credit hire charges, that ruling will demand a further investigation of claims by insurers. This can cause a more detailed investigation and verification about the circumstances of the entitlement and the need to hold on credit terms, which could result in final costs in cases higher than the requested advances from insurers.
Practical Implications
Claimants should take specific steps to align with the court’s criteria: Demonstrating Genuine Need: Maintain records of how the replacement vehicle is essential for daily activities or employment. Provide evidence, such as work schedules, family needs, or medical appointments, necessitating a vehicle. Ensuring Reasonable Action: Explore and document all available options before opting for a credit hire vehicle. Choose a vehicle that is comparable to the one lost, avoiding excessively expensive hires. Keep thorough records of financial status and decisions made at the time of hire.
Conclusion
The High Court decision in Patti v First Central Insurance Management Ltd is an important case in the law of personal injury and insurance. It highlights the importance for claimants to prove both a need and reasonableness in the hire of a replacement vehicle under a credit agreement. In so doing the Court ushered in a sense of balance between a justifiable return to claimants and the overarching interests of insurers and hence generally led to fairer results in like disputes. Given that this is a precedent, moving forward it reinforces how those with claims and a certain application of the law should now act cautiously and more openly post any vehicle accident cases.
