Making amends

In the case of Copley.v.Lawn [2009] EWCA Civ 580 a powerful weapon was provided to the insurance industry, to enable them to curtail claims for credit hire, by sanctioning the right of insurers to intervene in credit hire claims, by offering a replacement vehicle sourced by the insurance company to make amends to the motorist, and where the cost was controlled by the insurance company.

However the Court of Appeal set out clear guidance which should be followed so that any such offer was put in appropriate terms and ensured that the interests of the motorist were not subordinated to costs considerations of the insurance company. This option exists over and above the fact that where impecuniosity is not relied upon, the measure of damages is in any event, the cost of spot hire.

In giving judgment Longmore LJ noted:

3 No doubt defendants’ insurers wish to take steps to inhibit unreasonable car hire costs incurred by claimants. But not the least curious thing about the dispute which has arisen in these standard running-down cases is that it is well settled that, although a claimant can recover the cost of hiring a replacement car, he can only recover the reasonable rate of such hire; that has been held in Dimond v Lovell [2002] 1 A C 384 to be the market or “spot” rate. Thus to the extent that the Helphire rate contained an element of uplift due to the fact that payment of hire was deferred or the claimant was given easy credit terms or the fact that the possibility of failure to recover from the defendant was covered by insurance, that uplift could not be recovered. It is not usually difficult to ascertain the spot hire rate for cars equivalent to a claimant’s car and one would therefore expect any argument between claimants and their insurers on the one hand and defendants or their insurers on the other hand to be confined to ascertainment of the “spot” or market rate.

The propriety of making an offer of amends by a replacement vehicle was not in dispute: sending innocent motorists obscure or threatening correspondence was deprecated by the Court:

4 Mr Butcher QC for the claimants did not, however, feel able to submit that the doctrine of mitigation had no application at all to claims for loss of use of a car whenever a claim for the “spot” rate was made. He accepted that if a defendant’s insurers could obtain an equivalent replacement car and offered to provide it to a claimant, the question could arise whether it was reasonable for a claimant to reject that offer. His submission was first that on the facts of the present case it was not unreasonable for Mrs Copley and Captain Maden to have taken no (or no positive) action in response to KGM’s letters and secondly that, if it was unreasonable to have failed to respond, they could nevertheless recover the rate that the defendants’ insurers would themselves have had to pay. Since the defendants’ insurers had never stated what rate they would have had to pay, there was no basis for making any deduction from the rate claimed which should be recoverable in full.

The letter written to the innocent motorist was set out in detail:

8 KGM’s letter to the claimants needs to be set out, regrettably at some length:-

“We are sorry to learn that you have been involved in a road accident with a KGM customer. We would like to assist you in trying to make the process of pursuing your claim as painless as possible.

We are able to offer you the benefit of our own approved repairer scheme to repair any damage to your car caused by this collision.

PROVIDED YOUR VEHICLE IS ECONOMICAL TO REPAIR, YOU WILL BE ENTITLED TO THE FOLLOWING:

1.A vehicle to suit your need will be made available at no cost to you for the period your own vehicle is off the road.

2. Free transportation of your vehicle to and from the repairer.

3. Inspection and authorisation of repairs, with the account sent direct to us for payment.

4. A three-year repair guarantee.

5. You will not have to pay any excess.

 

IF YOUR VEHICLE IS CONSIDERED TO BE BEYOND ECONOMICAL REPAIR, WE CAN PROVIDE THE FOLLOWING:

1. An inspection of your vehicle by an independent engineer with a copy of the report sent to you.

2. A cheque representing the engineer’s considered pre-accident market value of the vehicle, less any salvage value.

5. A hire vehicle to suit your needs will be made available at no cost to you for the period it takes for the engineer to inspect your vehicle, and a cheque will be sent to you for the market value.Even if you have already intimated a claim through your own insurer and choose not to use our approved repair service, we are still able to offer the benefit of a free replacement vehicle whilst your own is off the road.Should you elect not to accept the offer of our services, but instead utilise credit repair or credit hire facilities from another source, then we will refuse payment of any such claim made on your behalf.The reason for this is that you have a common-law duty to minimise your loss when making a claim and by choosing to ignore our offer and continuing with repairs and/or hire on a credit basis, you would clearly be failing to satisfy that duty

 

This conclusion carries with it an important consequence. If it is right to take into account the fact that insurers on both sides are involved (as is explicit in relation to the defendants and implicit in relation to the claimants), any offer made by the defendants’ insurers must contain all such information as will be relevant for the claimants and their advisers or representatives to make a reasonable response. One piece of information missing from KGM’s letter was the cost to KGM of hiring the cars. Whereas it might be said that that would be of no interest to Mrs Copley and Captain Maden as individuals, it would undoubtedly be of great interest to their advisers or representatives, since, if KGM could genuinely obtain hire cars more cheaply than the claimants could, it might be unreasonable to use the services of Helphire and a mitigation argument might get off the ground.

The Lord Justice noted at paragraph 17:

It is very difficult to know what an average driver would make of all of this. It comes (within a day or two of the accident) from the insurers of a defendant who has negligently caused damage to the claimant’s car and perhaps his person too. It has an unpleasant threatening tone to it and does not even suggest that the recipient should pass it to his insurer or solicitor for advice as to its contents. It is tempting to say that any recipient should be entitled to ignore it completely. But that is not a course which any of the judges below adopted. What is completely clear to me is that the cold telephone call to Mrs Copley was inappropriate. If that is KGM’s practice it should be discontinued forthwith.

The Court of Appeal was scathing about the terms of the letter:

We reserve the right to bring this letter to the attention of the Court in any subsequent legal action brought against our Policyholder or us.”

You will appreciate that if we do refuse payment of the claim for credit hire and/or credit repair, then you may be found liable for any payment that the credit hirer/repairer does not recover from us. No doubt, this will be explained to you when you sign the proposed agreement. We urge you to read the terms of the agreement very carefully.

If your vehicle is off the road and you are already in a replacement, please check the agreement you have signed as, unless the replacement provided is a free courtesy vehicle, we would like to substitute this with a vehicle supplied by us, at no cost to you.

Should you wish to use your own chosen repairer, please provide us with their details or their estimate to enable us to authorise repairs to them. Our offer to provide a replacement vehicle free of charge will still be applicable.

In that case the comparative cost was clear from the beginning and the claimant could make an informed choice. In the present cases no such informed choice was available to either the claimants or their advisers and I do not see how they can be said to have acted unreasonably in not accepting the offer in the form it was presented to the claimants. The claimants and their advisers need to know the true cost to the defendant and his insurers since it might, as Mr Butcher pointed out, be the case that the cost of the defendants’ insurers hiring the replacement car was actually the same as (or more than) the cost of hiring a replacement from Helphire. If that were the true position it could scarcely be said that it was unreasonable for the claimants to pay the Helphire cost.

Mr Walker submitted that the cost to the defendants’ insurers was entirely irrelevant. If they were prepared to bear that cost in its entirety (whether for good commercial reasons or completely altruistic ones) that was of no concern to the claimants. Judge Langan agreed with the submission but I cannot accept it. The present dispute is an ordinary commercial dispute and the court cannot close its eyes to the obvious fact that hiring cars is a profitable business from the point of view of the supplier and a cost–incurring exercise from the point of view of the hirer. A claimant who has been deprived of the use of his car by the negligence of a tortfeasor only has to take reasonable steps to mitigate his claim for that loss of use and he cannot, in my judgment, be said to act unreasonably if he makes (or continues) his own arrangements with his own hire company, unless he is made aware that this commercial enterprise can be undertaken more cheaply by the defendant than by his own arrangements. 

It follows from this that, if a defendant or his insurers does make an offer of a replacement car to an innocent claimant and he makes clear that he is going to pay less for such a car than the claimant is intending to pay (or is paying) for a car from a company such as Helphire, then (other things being equal) it may well be the case that a claimant should accept that lower cost replacement.

Mr Walker also submitted the decisions of the judges below were “findings of fact” and should not be interfered with by this court. There is no question of any interference with any finding of primary fact; questions of mitigation are however, questions of evaluation and judgment and there is no reason why this court should not interfere, if the judge’s conclusions are, in its considered opinion, wrong.

For the reasons given, I do not think that Mrs Copley or Captain Maden (whether by themselves or through their agents) acted unreasonably in failing to accept KGM’s offers or in failing to explore them further. I would, therefore, allow these appeals.

In conclusion the Court of Appeal summarised the position as follows:

I would therefore conclude

i) that, looking at the matter objectively, it is not unreasonable for a claimant to reject or ignore an offer from a defendant (or his insurers) which does not make clear the cost of hire to the defendant for the purpose of enabling the claimant to make a realistic comparison with the cost which he is incurring or about to incur;

ii) that, following Strutt v Whitnell , if a claimant does unreasonably reject or ignore a defendant’s offer of a replacement car, the claimant is entitled to recover at least the cost which the defendant can show he would reasonably have incurred; he does not forfeit his damages claim altogether.

If this is correct, the general rule that the claimant can recover the “spot” or market rate of hire for his loss of use claim is upheld, unless and to the extent that a defendant can show that, on the facts of a particular case, a car could have been provided even more cheaply than that “spot” or market rate.

The issue of a direct offer of a replacement vehicle was further considered in the case of Sayce.v.TNT (UK) Ltd [2011] EWCA Civ 1583 where if anything the position was strengthened, where the Court of Appeal concluded that a motorist who unreasonably refused the offer of a replacement vehicle was not entitled to any measure of damages, extending the principle in Copley.v.Lawn noted above:

I confess that I also have difficulty with the conclusion that a claimant who has unreasonably refused an offer from the defendant of a free car can recover “at least the cost which the defendant can show he [i.e. the defendant] would reasonably have incurred” (paragraph 32). That, it seems to me, reflects the approach taken in the first part of the judgment, namely that one must look at the matter from the defendant’s point of view, but it is not an approach that is reflected in the earlier authorities. Nor, with respect, do I think that it is one that is easy to reconcile with the principle relating to avoidable loss to be derived from the leading cases and summarised in McGregor on Damages 18th ed., paragraphs 7-004 and 7–014. It is right to note, however, that the decision in Copley v Lawn has received support in paragraph 7-068 of the same work

However whilst extending the Copley principle it was emphasised that full and proper information of the alternative vehicle must be provided and also the facility to take independent advice. The Court of Appeal was keen to emphasise all aspect of public policy, not only the concerns about costs expressed by the insurance industry, but also adequate safeguards for innocent motorists, in what is after all an adversarial situation. Aikens LJ stated:

What, in my judgment, is not acceptable is a tortfeasor being permitted to dictate to his victim what the victim must do to mitigate his loss. He is under a duty to mitigate his loss and must act reasonably in doing so. That is fundamental. Moreover, there is a public interest in keeping down the damages and costs which may follow from road accidents. The higher they are, the higher the insurance premiums paid by members of the public to obtain insurance. In the present case, Miss Sayce was properly warned to take independent advice (Moore-Bick LJ, paragraph 2).

The offer may not, however, be the best reasonable offer available from the victim’s viewpoint. In circumstances such as the present, there is also the risk of the cold telephone calling which occurred in Copley . The victim of a road traffic accident, such as the young woman in this case, can be expected to be in a vulnerable state of mind following an accident. Accepting the offer of a “free” vehicle from the tortfeasor will not always be the only, or best, way in which to mitigate loss. The victim may reasonably prefer to deal with a company in which she has confidence, based possibly on previous dealings. What is reasonably required by way of mitigation depends on the facts of the particular case.

The victim is entitled to a reasonable opportunity to consider what vehicle is an appropriate temporary replacement, bearing in mind his needs. A further very important consideration is the insurance cover to be provided, particularly as to third party liability, and whether it accords with the cover enjoyed by the victim under his existing arrangements. These may provide, for example, for the cover of any authorised driver, or for named drivers, possibly drivers under the age of 25. Arrangements would need to be set up, and any additional premium provided for. The victim may have his own particular needs, and obtain what from his viewpoint is a better deal, from his own sources. Tortfeasors may need to descend to particulars.

Despite attempts to use intervention in practice it has proved to have a limited effect: either intervention takes place too late or the letters that are written retain a vaguely threatening air, talking darkly about the sharing of data to prevent fraud, or such like phrases. They are not written in a way that could cynically be described as “fluffy” or which treat the injured motorist as a customer or client, which is really the acid test for a well drafted intervention letter.

Moreover, the utility of such a letter falls a long way short of the first and best option to an insurer facing a credit hire claim arising from the economic writing off a modest vehicle which is to swiftly make a “without prejudice to liability” interim payment at the earliest opportunity in respect of the pre-accident value of the vehicle. All too often the Claimant’s solicitor can put into a trial bundle monthly requests for interim payments, which are never responded too, whilst the hire continues to mount.

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