press release
Credit hire delay case spells warning for CHOs
25 November 2009
Credit hire organisations (CHOs) who unnecessarily delay matters
leading to extended repair and hire periods for insurers were dealt
a major blow following a recent County Court judgment against
credit hire group Accident Exchange.
In the case of Tiller v Green the claimant hired a car from
Accident Exchange for 52 days at the full commercial rate. The
defendant subsequently disputed the claimant’s hire period.
Accident Exchange, who was acting as the claimant’s agent, refused
to accept any reduction in the hire period and laid the blame for
any delay at the door of the repairing garage.
Accident Exchange were adamant that they had swiftly authorised
repairs and it was the repairing garage who had delayed matters by
failing to accurately estimate for the repairs, omitted areas of
damage and quoted for the wrong parts. In an unusual move the
defendant’s insurers took the decision to join the repairing garage
to the proceedings as part of a third party claim.
At trial the repairing garage was able to establish that they
had followed the correct procedures and in fact it was Accident
Exchange who had caused the delays by failing to instruct an
engineer and authorise the repairs in good time.
Whilst the defendants claim against the garage was dismissed on
these grounds, the judge decided to substantially reduce the period
of hire. As a result the overall charges fell from £9,303.25 to
£1,790.78.
The judge also departed from the general rule and ordered that
the claimant not only pay the defendant’s costs on an indemnity
basis with indemnity interest but additionally those of the
repairing garage. The decision took into account the fact that it
was the credit hire organisation who initially laid blame for part
of the delay on the repairing garage.
Chris Perry, in-house counsel at Browne Jacobson, acted for the
defendants. He commented:
“This judgement shifts the balance of power firmly into the
hands of a defendant’s insurers in cases where CHOs have
unnecessarily delayed authorisation and repairs for the purpose of
extending the credit hire period. It also highlights the risks
credit hire organisations now face in terms of the recovery of hire
charges and costs where there has been a failure to properly
investigate and consider the reasons behind any delay.”
Recent research by TCS, which acts on behalf of insurance
companies to reduce claim costs, estimates credit hire and repair
claims cost the insurance industry £1.2bn in 2008. According to
TCS, the average value of each credit claim received by the
insurance industry is in excess of £1,700. Based on recent
statistics the number of credit claims has nearly doubled from
400,000 in 2005 to around 700,000 by the end of 2008.
Chris Perry added: “It has to be acknowledged that often the
only beneficiary in cases of delayed repairs is the CHO themselves.
So it is not surprising that authorisation and repair delays are
two of the common problems insurers face in dealing with CHOs. The
Tiller judgment will add significant strength to an insurer’s bow
and hopefully make CHOs realise that they risk damaging the
validity of their claim by unnecessarily delaying repairs and
making erroneous claims against third party individuals.”
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