The claim arose because of a road traffic accident, the result of negligence on the part of the insured defendant. The vehicle damaged had been hired by the claimant while her own vehicle was undergoing repairs. The claimant brought proceedings direct against the insurer pursuant to the European Communities (Rights against Insurers) Regulations 2002, as amended.2 Liability was not disputed but the insurer denied responsibility for one head of contractual liability agreed between the claimant and a hire car company, that being a sum which the hire company sought to recover to meet alleged loss of use while the vehicle was being repaired. The sum was calculated by reference to the daily rate of hire under a credit scheme, capped at a 30-day period of hire cost. The rate under the credit scheme was significantly higher than the basic rental charge.

The claim to recover the hire charge as loss of use failed at first instance3 and also on two levels of appeal.4 The claimant (supported by the hire car company) appealed to the Supreme Court.

Decision: Appeal allowed.

Held: A tortfeasor has a duty of care not to cause physical damage to another’s property and if in breach will become liable to pay damages to include compensation for financial loss consequent on the damage. General rules such as those dealing with remoteness limit the recovery. A tortfeasor is not liable to a third party who suffers financial loss such as contractual rights made less valuable, sometimes referred to as “pure economic loss”. Claimant’s property includes property over which the claimant has a right of possession, eg, as a bailee. The claimant in this case was a bailee on the terms of the hire contract and as such she became liable to pay the charges. The insurer had not defended, on the basis