Following a road traffic accident, a vehicle hire company may offer the non-fault motorist a replacement vehicle for the period they are without their own. Sometimes this is done on a credit hire basis where the credit hire organisation does not charge the motorist or "hirer" upfront. Instead, the hire costs are usually recovered from the insurer for the at-fault driver.
However, in some cases, hire companies can face difficulty in recovering these costs. The at-fault insurer might dispute liability for the accident, delay making payment, or attempt to reduce the amount claimed. In many of these circumstances, settlement can be achieved without court proceedings. In a small number of cases, a court action may be necessary. This is similar to when the insurer of the non-fault motorist pursues the at-fault insurer for the cost of, for example, vehicle repairs and is known as "subrogated recovery".
When can the cost of a hire car be recovered?
In order to recover the cost of hiring a car after an accident, it is important to ensure that there is a good reason why a hire vehicle was needed. It may be reasonable for the non-fault motorist to hire a replacement vehicle in the following situations:
- They needed access to a vehicle.
- Their own vehicle is unroadworthy and awaiting repair – this means the vehicle cannot be driven as a result of the damage sustained in the accident.
- Their own vehicle is being repaired.
- Their own vehicle has been declared a total loss and they are waiting to be reimbursed (by their own, or the at fault insurer) so they can purchase a new vehicle.
Impecuniosity: What is it?
If the non-fault motorist cannot finance their own replacement vehicle, they may be able to obtain a vehicle on a credit hire basis.
To establish whether the non-fault motorist could have afforded to pay for a hire vehicle upfront, it may be necessary for the person to provide the court with copies of bank statements, credit card statements, and/or wage slips.
What happens if impecuniosity cannot be established?
If the non-fault motorist is not impecunious then the at-fault insurer has to prove that a hire car would have been available to them, at a lower cost. If the at-fault insurer can prove such an alternative vehicle was available, then it can be argued that the at-fault insurer should only pay the lower amount.
What is mitigation?
When a motorist has suffered loss as a result of an accident caused by another driver, they have a general duty to take reasonable care to mitigate their losses - not just in relation to credit hire.
The following list gives some examples of how a non-fault motorist can mitigate their loss when it comes to the hire of a replacement vehicle:
- Length of hire – don't return the hire vehicle late or keep it longer than necessary.
- "Like for like" – the replacement vehicle should be as similar as possible to the non-fault motorist's own vehicle.
- Offer of alternative vehicle from the at fault insurer – the non-fault motorist should not refuse an offer of a replacement vehicle for the at fault insurer if the offer is reasonable, (see our blog on Intervention).