Where an insurer supplies a hire car to its insured following an accident, it is entitled to recover a commercial rate for the hire and not a discounted corporate rate.

Bee v. Jenson

[2006] EWHC 3359 (Comm)

Facts

The Claimant’s vehicle was struck by the Defendant’s car causing significant damage. The Claimant had a policy of insurance with CIS and DAS which entitled him to a hire car. The Claimant’s car was not capable of being driven and, whilst it was repaired, he was provided with a hire car for 21 days at a daily rate of £29.07 inc. vat, which was equivalent to the ABI GTA rate for the category of vehicle. DAS was invoiced and paid the hire charge and, through its right of subrogation, sought recovery from the Defendant and his insurers, RSA.

Hire Arrangements

The Claimant’s policy provided that DAS would pay vehicle hire costs where the vehicle could not be driven and the accident was entirely the fault of an identified driver of another vehicle, for which there was valid insurance. DAS entered into a business agreement with Helphire Group plc under which Helphire supplied hire vehicles for DAS policy holders for which DAS paid.  Pursuant to this contract, Helphire supplied a vehicle to the Claimant.  An agreement was drawn up naming the Claimant as the hirer and his signature appeared under the following clause :

"I agree to hire a vehicle ("hire vehicle") from Helphire (UK) Limited ("Helphire") on the terms of this agreement.  I accept it is my responsibility to pay for all penalties set out in Condition 10 overleaf …..   I acknowledge receipt of a copy of this agreement."

Under the agreement, DAS was named as the "Company" and Condition 1 stated :

"The Company has agreed to pay the hire charges and any extras shown overleaf as payable by them for your use of the hire vehicle during the approved period shown overleaf or any extension the Company authorises."

Liability

The Defendant made a number of detailed submissions but RSA’s arguments essentially came down to :

1.         The liability for the hire charges with DAS and not the Claimant so that, as he had no loss, he could not recover the charges from the Defendant;  alternatively

2.         If charges were recoverable, they should be limited to the actual cost to DAS.  RSA argued that DAS would have negotiated a corporate rate with Helphire of £16.44 - £19.92 per day including vat so would make a profit if the full rate of £29.07 was allowed.  DAS should also give credit for any commission payment made by Helphire in respect of each hire.  (DAS did not admit or deny that a commission was paid or a corporate rate negotiated).

Morrison J. held :

(1)        The statement that "I agree to hire a vehicle … on the terms of this agreement" was sufficient to impose on the Claimant an obligation to pay hire charges if the insurers failed to.  He was thus entitled to recover the cost of hire.

(2)        The agreement was made by the Claimant and there was no basis in law in which he could be expected to give credit for a payment to which he was not himself entitled.

            "Once it is accepted as a fact, as it is, that Mr B was entitled to hire a replacement car at a reasonable rate and for a reasonable period, he is, without more entitled to recover those hire costs from the tortfeasor. 

The tortfeasor is solely concerned with the reasonableness of the charges, assuming a need for a replacement vehicle.  If, as they are, they are reasonable, he must pay them, whatever insurance arrangements Mr B may have made, and more importantly whatever arrangements Mr B’s insurers may have made."

In fact the rate charged by Helphire, with a nil excess, was very good value for money by comparison with other spot rates. The fact that DAS and Helphire may have negotiated a commission or other form of payment in the light of the large commercial contract was not a matter of which RSA was entitled to take advantage.

Simon Cradick can be contacted on 029 2038 5464 or be email.