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Insurance Law Monthly

Credit hire

Motor liability insurers are facing an ever-increasing bill for the costs incurred by the victims of their assureds in hiring replacement vehicles, particularly where the hiring is done under credit hire arrangements which inflate the ordinary cash price of such hiring. The general rule is that the victim is confined to the spot rate for hire where such hiring is necessary. If the victim does not need to hire a replacement vehicle (or does not need to use credit hire) he will still be entitled to damages but they will be assessed on a different basis. What that basis may be was discussed by the Court of Appeal in Beechwood Birmingham Ltd v Hoyer Group UK Ltd [2010] EWCA Civ 647.

Beechwood: the facts

BB was a substantial firm of dealers in Audi motor vehicles, and at any one time it held a large stock of vehicles for sale. One of the vehicles was damaged in an accident which was allegedly the fault of the defendant, HG, and required significant repairs. The service manager, who had the use of the vehicle, chose not to reallocate to himself a similar car from BB’s stock, and entered into a credit hire agreement for the hiring of an equivalent vehicle. The purpose of the hiring was not the need for an additional car, but rather to test a form of credit hire agreement which had been developed by BB and Accident Exchange Ltd. The repairs took 120 days. The cost of repairs was £3,071.40, and the credit hire costs were £30,239,00, based on a daily rate of £250.95

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