Intervention in credit hire claims – a knockout blow?

The owner of a vehicle is usually entitled to a replacement vehicle following a road traffic accident that was not their fault for the period their vehicle is off the road. Often a replacement vehicle is offered on a credit hire basis which means the vehicle owner does not have to pay for the hire at the time. For more information about credit hire, see our brief guide on credit hire. After the hire has ended, the hire company will endeavour to recover the costs from the at fault insurer. For this reason, many insurance companies acting for the at fault party seek to reduce their losses by offering the vehicle owner a "free" hire vehicle by way of an intervention letter as soon as they are first made aware of the incident. If the vehicle owner does not accept this offer, and a claim is then made in respect of the credit hire, the at fault insurer may argue that the vehicle owner has failed to mitigate their loss.

When will an intervention letter be effective?

For an intervention letter to be successful, sufficient information must be provided regarding what is being offered. Due to a lack of Scottish case law on the subject, Scottish courts and practitioners often turn to decisions from the courts of England and Wales to provide guidance on this issue. To date, the English courts have taken a restrictive view on what constitutes an effective intervention letter. The leading case is the Court of Appeal decision in Copley v Lawn [2009] EWCA Civ 580 which sets out a number of requirements.

For an intervention letter to be effective it should;

1. outline the cost of the replacement vehicle to the insurer;
2. make clear that a hire vehicle of a similar make and model to the hirer's own will be provided;
3. be clear, simple and concise;
4. not adopt a tone that may appear threatening;
5. not include any requests for information; and
6. arrive with the claimant or pursuer either before they enter credit hire or during the credit hire period.

The key consideration for the court in Copley, when assessing whether an intervention was effective, was whether the claimant was provided with sufficient information to enable them to make a "realistic comparison" between the at fault insurer's offer and the credit hire costs which they were about to incur. If not, the court considered it to be reasonable for the claimant to reject the insurer's offer as the claimant had not failed to mitigate their loss. If a reasonable intervention offer is rejected however, the claimant may only be able to recover the market rate of hire (or the cost outlined in the intervention offer if lower).

Key takeaways

An effective intervention is likely to restrict the hire costs which a credit hire organisation (CHO) is able to recover from the at fault insurer. It is therefore important in any claim for CHOs to confirm at the earliest possible opportunity whether intervention correspondence has been received from the insurer and obtain copies of this correspondence.

If correspondence has been received but the intervention letter does not appear to meet the Copley compliant criteria, it may be possible to argue that a successful intervention has not occurred and the CHO can continue to provide the hire vehicle on a credit hire basis.

Where the intervention letter does appear to meet the criteria set out in Copley, CHOs should clarify with the hirer why they did not accept the insurer's offer. Although it has not yet been tested in the Scottish courts it may be possible to demonstrate that rejection of the offer was reasonable.

At fault insurers may also try to contact the hirer by phone rather than letter. If an intervention offer is made over the phone, it will still require to meet the criteria set out above. However, insurers should be careful about making intervention offers via telephone, particularly given the court's view in Copley that the 'cold' telephone call made to the claimant was inappropriate.

It is important that intervention letters are sent out by insurers to potential claimants at the earliest possible stage and that they are reviewed regularly to ensure that they meet the Copley criteria set out above.