17 July 2020

For Scottish solicitors representing insurers in credit hire claims, it can be difficult explaining to clients south of the border the current landscape in Scotland when it comes to credit hire. Despite a significant credit hire market existing north of the border, credit hire litigation in Scotland has produced very little by way of useful authority on the big issues.

And so it is with the issue of credit hire “intervention letters” from insurers. Most insurers have an intervention strategy whereby the claimant will be offered a replacement vehicle which is arranged and paid for by the insurer at some point following the accident. The aim is to avoid or minimise credit hire costs by offering the hirer a cheaper alternative.  

The disruption caused by the coronavirus lockdown to repairing garages and the supply chain for replacement parts will undoubtedly result in longer credit hire periods and larger credit hire accounts being claimed. The need for insurers to implement an effective and robust intervention strategy has never been more urgent.

As insurers know all too well, the difficulty arises in seeking to ensure that the intervention letter complies with the requirements set out in the Court of Appeal decisions in Copley v Lawn [2009] EWCA Civ 580 and Evans v TNT Logistics [2007] 3 WLUK 292. This issue has not been the subject of an authoritative published decision from the Scottish courts but, again, these decisions are regarded as being highly persuasive and are referred to and applied by Scottish practitioners dealing with credit hire claims.

The “Copley compliant” credit hire intervention letter is an important tool to any insurer seeking to keep the costs of credit hire to a minimum. Whilst a pursuer or claimant is entitled to a replacement vehicle whilst their own is being repaired, they are also under a continuing duty to mitigate their losses. Accepting the offer of a suitable replacement hire vehicle from an insurer, where the cost of the hire is borne by the insurer, is one such way for a claimant to mitigate his or her losses.

In order to be effective, the intervention letter will need to outline the cost of the replacement vehicle to the insurer. The hirer will need to be in a position to assess the comparative cost of the insurer’s offer and hiring a vehicle from a credit hire company. The letter will need to be tailored to the specific circumstances and requirements of the hirer, offering a suitable replacement taking into account the make and model of the hirer’s own vehicle. Generic letters offering ‘free’ hire are unlikely to be sufficient. Intervention letters which have been criticised by the court in the past have also been confusing and have adopted a threatening tone.

Recent examples from the English county courts of “Copley-compliant” intervention letters can be seen in cases such as Powel v Palini, Birmingham County Court 2016, where the insurer’s letter to the hirer included the following:

"The replacement vehicle whilst free to yourself will be billed to us at £85.50 plus VAT per day for one to two days' hire, £71.50 plus VAT per day for three to six days' hire, £63.50 plus VAT per day for seven-plus days' hire.

The vehicle supplied to you will be a Mercedes S-Class three-litre or something similar.
However, if you do not require a prestige vehicle, we are also able to provide a vehicle similar to a Ford Mondeo two-litre for £46.50 plus VAT per day for one to two days' hire, £40.50 plus VAT per day for three to six days' hire and £34.50 plus VAT per day for seven days' hire plus.”

The court’s approach was to look at the contents of the intervention letter objectively and determine whether it made clear what the cost of hire to the defendant would be for the purposes of enabling the claimant to make a realistic comparison with the cost that he was incurring with the credit hire provider. The court held that it did. It did not matter that the claimant’s credit hire had already started. He had an ongoing duty to mitigate and ignoring the defendant’s offer was unreasonable. The claimant in this case sought clarification on some of the details of the offer made by the defendant. However, instead of contacting the defendant to seek any clarification of the offer or to raise with them any issues which he had, he merely referred the letter to the company from whom he had hired a replacement vehicle. This was held to be unreasonable and a failure to adequately mitigate his losses.

The Scottish courts are likely to take a similar approach. The consequences for refusing to consider or take up a reasonable offer of a replacement vehicle from an insurer could well result in the claimant or pursuer only recovering the cost of hire at the lower rates offered by the insurer (Copley v Lawn, Evans v TNT Logistics, O’Grady v Jain). The Scottish Outer House Court of Session decision in Donal Nolan v Advance Construction Scotland Limited [2014] CSOH 4 is also relevant. In that case, Copley v Lawn was referred to in determining the damages that would be awarded where there had been a refusal of a cheaper offer in a case involving depositing waste material on land.

Insurance companies should, therefore, take comfort in the fact that, in the context of intervention letters, the same arguments regarding mitigation of loss and reasonableness that are used in England can be also be relied upon when it comes to defending and negotiating credit hire claims in Scotland.

For more information on this article or credit hire claims more broadly, please contact Angus Gillies.

Contact

Angus Gillies, Associate agi@bto.co.uk / 0141 221 8012.