You’ve just had a car accident, you’re without your car – an immediate and real problem. You still have your usual commitments, including work and school travel. Most people with comprehensive cover presume that their insurers will look after everything and often don’t give it much thought when they are offered a replacement vehicle. At best, they might check it is ‘like for like’.
If you have comprehensive insurance cover, the chances are you have a replacement courtesy car option on your motor policy in the event of an accident. That in itself suggests this would not cost you anything, and it is correct to say that a true replacement vehicle, otherwise known as a courtesy car, is free, as your insurers arrange and pay for this usually at reduced rates because they ‘buy in bulk’.
If you are ‘at fault’ for the accident, it is very unlikely you would be offered anything other than a free like for like courtesy vehicle, as this is the cheapest option for your insurer. It should not cost you anything to use it, although it is often time limited to 14 days or 28 days only (which is usually sufficient time to repair or replace your own vehicle).
However, the reality is that if an insurer thinks that you are not at fault for the accident, then they may put you in touch with, or arrange for you to be contacted by, a claims management company or credit hire company offering credit hire instead. Essentially a profit can be made the credit hire company as a result of the accident because it wasn’t your fault, so they know the defendant’s insurers will be responsible for paying your losses.
Sometimes senior staff are involved with both companies i.e. your insurance company and the credit hire company. It is unlikely that the insurer would particularly notify you of this interest. Policyholders are rarely made aware of the differences between a credit hire car and courtesy car, and this is something which is not really acceptable, because a credit hire car incurs a personal liability on your behalf to pay credit hire charges if these are not recoverable from the at fault driver.
In addition, those charges are subject to credit interest being applied, so that the vehicles cost significantly more than the rates insurers normally pay for courtesy cars. Naturally, the better the car, the more it will cost.
Tests you must satisfy in order to recover all credit hire charges incurred
As credit hire vehicles cost significantly more, when trying to claim back credit hire charges from your opponent, the Court will address a number of requirements, which must be satisfied in order to fully recover those charges. If you cannot satisfy those conditions, you remain liable for the full credit hire charges incurred BUT will not recover the full balance from your opponent, leaving you personally liable for the shortfall. There is no guarantee that the credit hirer will waive the difference.
Simply put ‘impecuniosity‘ means, could you have afforded to pay the normal market rate yourself?
If the Court has decided you could have afforded to pay these and seek a refund from the other driver then they Court won’t order the credit interest amount to be paid as well. This would leave a shortfall. In reality, anyone with a full time job is unlikely to satisfy the ‘impecuniosity test’.
Crucially, it is only a Court that will have the final say on this point and so it is always a risk to proceed to a court hearing to assess the sum the Defendant should pay. You will also be expected to provide sensitive documentation including proof of earnings and relevant bank statements for the period of time you hired.
You must show a real need to hire a car
Basically, one must show a real need to hire a credit hire replacement vehicle. If the household had no other vehicles or other members used all of the other available vehicles, need would be easy enough to satisfy.
But, if you had access to another suitable vehicle, then it is extremely unlikely the Court will order the Defendant to pay the credit interest element of the credit hire vehicle. Additionally, there is a real risk in this particular scenario that the Court does not order the Defendant to pay anything at all, since there is a duty to ‘mitigate losses’ and if there is no need to hire a car at all, then why should the Defendant pay for one?
You must be able to demonstrate the credit hire car was physically used. If you were unable to drive because of your injuries, or indeed other non-accident related such as a holiday or even possibly these days being in isolation, then you can only expect to recover charges for the period the vehicle was being used.
How long do you keep a hire car?
The Defendant only has to pay hire charges for the time the vehicle is needed. If you keep it longer than required, then the Defendant won’t have to pay for this. As a general rule of thumb, a credit hire car should be handed back the same day that the driver’s own car has been handed back fully repaired or alternatively within 7 days of receiving a cheque from insurers for the pre accident value (PAV) of their vehicle.
So if the credit hire car is left with you past the point it should have been reasonably collected or handed back you are at risk of being liable for those additional charges, not the other side.
Court and civil trial over hire charges
A credit hire car agreement does not end when you hand the vehicle back. You will be expected to fully co-operate with the credit hire company their legal representatives as you will have signed terms to this effect when signing the credit hire agreement. Failure to do so renders you liable to reimbursing the credit hire charges yourself.
Co-operation may include agreeing that proceedings are issued in your name in order to recover the charges from the Defendant, and if your case does not settle, you will be expected to attend a civil trial, where the credit hire documents as well as your financial documents and witness statement will be considered by the Court and Defendant, and you will be cross examined by the Defendant’s barrister.
Conclusion – insist on a free replacement courtesy vehicle
Where does this leave us? In the same position we have been for many years – if you have a free replacement courtesy vehicle option on your policy insist on just that.
Do not let insurers, or credit hire companies or claims management companies entice you into a credit hire agreement which benefits them and which puts you at personal risk to reimburse them for those credit hire charges.