Introduction
The legal position on credit hire charges in the context of road traffic accidents has been heavily impacted by the recent Court of Appeal judgment in Patti v First Central Insurance Management Ltd [2021] EWCA Cave 822. This important decision provides needed clarity on the recoverability of those charges as special damages, a topic that has long divided personal injury and insurance law. In this blog, we discuss the facts of the case, the reasoning of the Court of Appeal and the wider implications of this seminal judgment.
Background of the Case
Patti had been hit by a car that was not his fault. After the incident he had to pay for the repairs to his vehicle as well as hire a replacement vehicle during the repair period. He adds: ‘Those costs for replacing the vehicle — known as Credit Hire Charges — were at the heart of the legal case. First Central Insurance Management Ltd, Mr. Patti’s underwriter, disputed that the costs were recoverable and a long legal battle ensued.
A credit hire charge is an amount payable by a defendant to a claimant for hiring a replacement vehicle on credit terms, usually through necessity as it is unlikely that the claimant has the money to pay the hire charges upfront. This results in the hire company pursuing the costs of the hire directly with the insurance company of the at-fault party. It considered the major legal issue in this case, whether these charges can amount to special damages, together with repair costs.
Legal Issues
Personal injury Credit hire charges are a popular topic within the personal injury claims. Special damages are specifically those losses for which a claimant can show that a reasonable person in the claimant’s position would have suffered because of the defendant’s breach of duty. Finally, in Patti, it was argued that credit hire charges did not fall within this definition. Mr. Patti initially sought reimbursement for these expenses, but First Central Insurance Management Ltd argued these costs were unreasonable and not clearly related to the accident, which Mr. Patti disagreed off.
Court of First Instance
But the lower court held originally that the plaintiff could not recover the credit hire charges as special damages. The court found that these costs were exaggerated in view of the price that would actually have been payable to hire a car and were not a direct financial loss caused by the accident. Unsurprisingly, claimants’ advocates decried this decision, contending that it opened the floodgates to the type of recovery of essential services costs that should always naturally follow an accident.
Court of Appeal Decision
The case was then appealed to the Court of Appeal, who went through the legal principles at great lengths. This has been appealed to the Court of Appeal, who has held that credit hire charges are indeed recoverable as special damages, overturning the High Court decision. The other reasoning used by the Court was that these charges are a genuine and necessary expenditure because the claimant required a replacement vehicle whilst the repair was being carried out.
The principal factor, according to the Court of Appeal, is that the fees must be reasonable. The Court accepted that credit hire rates were likely higher than standard hire rates, but held that the inability to hire a standard hire vehicle for the want of immediate funds made the need to make use of the services of a credit hire company. On the circumstances, therefore, it could not be said that these charges were excessive or exorbitant charges.
Implications of the Ruling
The decision has broader implications for claimants and insurers. The judgment demonstrates the important principle for claimants, that expenditure of this nature, which arises as a result of someone else’s negligence, is recoverable This gives a peace of mind for someone who otherwise would have no way to pay for a replacement car while getting their car fixed. The ruling requires insurers to re-examine how they manage credit hire claims. The burden now falls on insurers to accept these charges as special damages, and of course to re-tailor their settlement practices accordingly.
This is liable to drive up the cost of insurance, as insurers pass on the increased price of credit hire claims to their customers. FasdfadMore importantly, the Patti decision is bound to have an impact on legal practice in future cases of the kind. The decision potentially provides a clear precedent for courts to follow when considering whether credit hire charges qualify as special damages and as such, may simplify the adjudication of linked disputes.
Critical Analysis
The decision of the Court of Appeal in Patti v First Central Insurance Management Ltd has been greeted as both a measured and a just approach to the topic of credit hire rates. The Court, by acknowledging the actual financial positions of the claimants, has kept the victims of road traffic accidents from being deprived of a way to be mobile, due to their financial inability to pay for the transportation.
However, there are others who have responded that the decision in Soriano’s could possibly mean increased deductions for all costs associated with a personal injury claim, which could then be shouldered by the insurance industry and policyholders in the form of increased premiums. Moreover, there is a fear that the ruling may tip off credit hire costs rising beyond fair and reasonable levels as the hire companies have an official recognition from the Court allowing them to treat these costs as damages they can recover.
Conclusion
The Patti v First Central Insurance Management Ltd [2021] EWCA Cave 822 case is an important development in how credit hire charges are treated in law. In confirming that these charges are recoverable as special damages, the Court of Appeal has brought clarity and fairness to claimants who are left needing a replacement vehicle following an accident.
The ruling will not only affect the claims of the future but will help to encourage fairness in balancing the interest of both the insured and claimants. In the future, the manner in which this ruling influences credit hire charge claims and the more general impacts it could have on the personal injury and insurance industries will be well worth keeping an eye on.
