The first few months of 2015 will be remembered in the main for another positive message delivered by the judiciary for insurers. The case of Stevens -v- Equity has provided further clarity for compensators on the tackling of credit hire rates within the market, and the objective test that needs to be set to assess quantum.
Later in this edition we have an overview from Mel Mooney as to the outcome of Stevens, but I thought it useful to relate our experience of the credit hire market behaviours since judgement was confirmed.
The interest in Stevens and its impact was evident by the level of attendance at a roundtable event hosted by Keoghs for insurers earlier this month, which for me highlighted the desire for compensators to get the application of Stevens right.
From my perspective Stevens has very much ratified internal processes that were already in place for managing pre-litigation claims, in the main those handled within the GTA; that being, to follow the GTA and apply the necessary tests within the framework, but not to be fearful of advising CHOs of what they are likely to experience if they do not adhere to the protocol or if litigation ensues.
This approach typically delivers the result of 75 – 80% of claims being settled within 30 days, and when a case does litigate the average paid is significantly less than the GTA.
To my mind Stevens should reinforce the credit hire market’s desire to work effectively within the GTA, but will obviously lead to some interesting debate at the next rate review. Historically GTA rates have always been a ‘compromised discount’ from the commercial rate as it once was. Following this judgement it can be argued that the commercial rate is no longer the applicable benchmark (except in the case of an impecunious claimant perhaps), and the GTA rate should be amended accordingly.
Our research across a sample of thousands of cases shows the lowest mainstream rate to be significantly less than the GTA rate; indeed up to 50% less in certain vehicle categories. As a consequence since Stevens we have seen the credit hire market attempting to apply a subjective (rather than the objective) test, particularly in respect of excess reduction to avoid this eventuality.
Stevens now provides High Court precedent to the ‘objective methodology’, and we have seen this being applied since the judgement in the majority of cases in the lower courts where we have observed a much lower number of first instance decisions going in the claimant’s favour. Nevertheless, where the judgements have gone in the claimants’ favour, the credit hire market has been very quick to highlight such cases, which is understandable from their perspective.
However, the guidance on how to calculate the BHR in Stevens has been widely in place and applied by insurance lawyers for some time. We have regularly seen claimants stating in cross examination, that they would have picked the lowest rate if they had hired a car themselves, perhaps that closest to them geographically, a brand they recognised, or a combination of all of these. This has led to County Courts widely applying this as the ‘best evidence’ (per Bent 2) when deciding on recoverable damages.
Again this may not be particularly visible to CHOs who do not litigate in volume, or who do not get feedback from Counsel when their case failed.
It appears that certain sections of the credit hire market seem determined to try and challenge Stevens by appealing further cases on similar facts. This is a high risk strategy in our view and we anticipate that ultimately it is one that will fail. Keoghs are involved in a number of these cases and so can talk with confidence on these points.
Keoghs handle almost 2,000 GTA claims per month for a number of insurers, in addition to litigation; so we can already comment on some of the ramifications of Stevens:
Our litigated teams are feeding back very similar experience in terms of claimant solicitors not accepting our pre-trial offers:
Claimant solicitors and CHOs seem to be hoping that by running small claims track cases to trial (with relatively low costs risk) they will get an outcome different to that set out by the Court of Appeal. The reality for them is that our experience does not vindicate that hope in the majority of cases. No doubt it is this reality that accounts for why we have seen the enhanced appetite of CHOs to trumpet the few successes they have seen since the judgement.
It does beg the question why, if the claimant market is so confident in respect of the subjective test for excess reduction, it is choosing to run further cases to the Court of Appeal to challenge Stevens?
Keoghs’ unique exposure to the whole credit hire process across our pre-litigation and litigation teams puts us in a great position to identify any change in behaviours at each point, and we will continue to feed this experience back to the market over the coming months via our newsletters, briefings, meetings and events.
Away from the Court of Appeal, Slater and Gordon’s purchase of Quindell seems to move ever closer.
A significant amount of interest from insurers will be on the reported 53,000 NIHL claims that Quindell stated in their announcement as being currently live. There will doubtlessly be intrigue over what this purchase means for the credit hire operation that services approximately 15% of the market.
In February Slater and Gordon presented detail of their ambitions within the UK market through their half year results, stating a desire to be the ‘leading law firm’ and the ‘law firm of choice’ in the UK. They further outlined during the course of investor questions the opportunities that they saw in growing their footprint in AMC, broker and insurer markets; Quindell to an extent, delivers many of these requirements.
The cash flow credit hire generates (particularly through the ‘Collaboration Protocol’) will assist the growth in other revenue streams for Slater & Gordon in the short/medium term. How they manage this and communicate with the insurance market more widely remains to be seen, but I am sure we will find out relatively quickly!
Finally, we continue to see an increasing appetite from insurers to access the end to end data Keoghs holds across the market. Examples of data* that we have provided over the last quarter include:
* data is pulled from settled cases for all clients/schemes and includes settled litigation.
If, as an insurer, you would like to see the details behind these figures please do not hesitate to contact me.
John Gibson
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