Extras and excess

One of the issues that often arises is the question of additional daily charges to waive an excess that might apply in the result that the car is damaged, which are charged by credit hire companies in addition to a daily rate of hire. These elements have always proved recoverable.

Some 30 years ago in the case of  Marcic v Davies (Unreported Court of Appeal 20th February 1985) the argument that collision damage waiver (CDW) incorporated an element of betterment was decisively rejected by the Court of Appeal. The same considerations would apply to any analogous charges such as theft excess waiver (TEW).

In his judgment Browne-Wilkinson LJ found:

I do not accept that submission. In accordance with the ordinary rule of damages the plaintiff is entitled to be put back, as far as possible, into the position in which he would have been had the collision not occurred. If there had been no collision the plaintiff would never have come under any contractual liability to the car hire company. It was accepted that it was reasonable for him to hire the car from the car hire company. Since he could only do this by effecting comprehensive insurance in the full amount or by bearing the excess of £150, if he had elected to bear the excess himself, he would, under the terms of his hiring contract with the hire company, have come under a contractual liability to pay £150 to the hire company in respect of damage. What is more that would be damage not to his own motor car but to the hire company’s motor car. Accordingly, this liability for £150 that he would have had to the hire company if he had not paid the waiver fee would have been a contractual obligation which he would never have been under had it not been for the original collision with the defendant…

The element of betterment to which Mr Tudor-Evans referred would only have arisen if during the period of the hire the plaintiff had in fact had a further accident. It is true that if that had happened to his own motor car he would have had to bear the whole cost of the damage to his motor car if he had decided to have it repaired, whereas if the hire car had crashed during that period he would not have had to bear such cost. But in fact no such accident occurred. What we are concerned with is the covering the plaintiff against a contractual liability that he was bound to enter into and the cost of so doing. In  my judgment the learned judge was right to include the waiver fee as an item of recoverable damage.

More than 20 years later the observations in the Marcic case were applied agains. In the Commercial Court decision in Bee v Jenson [2006] EWHC 3339 (Comm)Morrison J observed as follows:

On the question of quantum, it is now clear on the evidence that the rate charged by Helphire, with a nil excess, was very good value for money, by comparison with other spot rates. Many hire companies are unwilling to remove the excess; some will merely reduce” it. Had the point been live, I would have held that it was reasonable for the replacement vehicle to have been provided with a nil excess regardless of the excess which applied to Mr Bee’s own car. I do so for the reasons advanced by Mr Butcher. I quote from paragraph 35 of his skeleton argument, with which I fully agree:

“The fallacy in [the Defendant’s expert witness’] case on [collision waiver damage] is that whilst asserting the betterment of the nil excess, he disregards the detriment [Mr Bee] suffered by being placed in a car belonging to a hire company. He treats Mr Bee as if on receiving the hire car, he was in the same position after the accident as he was before it. Obviously, he was not. He was not in his own car; he was in somebody else’s. He was obliged to return the car in the same state as he received it. Were his own car damaged, he could defer repairs, perform amateur or temporary repairs or not bother with repairs. These would not be options with Helphire. Moreover, were [Mr Bee] to blame for damage to that vehicle, he would be subject not only to a claim for the cost of repair, but also for Helphire’s loss of profit whilst it was out of commission. In other words, by forcing [Mr Bee] into a hire vehicle, [the Defendant] was exposing him to risks which he did not previously face, such that his insurance needs were different. As such, it is impossible to portray the nil excess as a betterment. It was a reasonable arrangement, consequential on the tort. “

In any event, there is a decision on this issue in an unreported decision of the Court of Appeal given on 20 February 1985 Marcic v Davies. There, the court held that the claimant who hired a replacement vehicle and paid the waiver fee to achieve a nil excess when his own excess had been £150 was entitled to recover that fee since if there had been no collision the claimant would “never have come under any contractual liability to the car hire company”. “It was entirely reasonable that he should pay the waiver fee to cover himself against a contractual liability which he would otherwise never been under.” per Lord Justice Browne-Wilkinson. Mr Flaux accepts that this case is binding on me. I have no hesitation in following it for the reasons expressed above.

Since the landmark decision in Stevens v Equity Syndicate Management Limited [2015] EWCA Civ 93 (of which more, much more will be said in subsequent posts) the issue of excesses and waivers has taken on an added significance, in the context of establishing whether comparative basic hire rates for hire cars, really are in fact comparative.

The view might be taken that to compare a credit hire car with a “nil” excess due to waivers and a hire car with a £1500 excess, is in fact to compare apples with oranges, and to come up with an answer that is “bananas”. In such circumstances, it could be said there is no true comparator to displace the credit hire rates claimed in the claim.

Conversely, insurers might argue with a degree of force, that the overall contractual package should be looked at to see whether overall it is a reasonable comparative option, or that it is well known that an excess can be cheaply mitigated by purchase of a stand alone insurance product: a device beloved of certain rates witnesses.

The balance of the arguments has resulted in mixed decisions at first instance. A number of cases, which can be downloaded here illustrate the arguments. The decisions of Lawson v Mullen Judge Freedman, Shah v James Recorder Hedley, Shaw v Mcleans Judge Harris QC and Cheung v UK Insurance Judge Worster reflect a division of opinion on the county court bench, as the correct way to approach this vexed question. However a case Clayton v EUI Limited (trading as Admiral Insurance) is on the way to the Court of Appeal, and may shed some further light on this issue.


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