Review of the Quarter: Credit Hire AWARE 9

In January George Osborne outlined prospects for further reform to the insurance market and the manner in which compensation for low value claims are to be pursued. Reform to the small claims track limit has long been speculated upon and pushed for by insurers, and was definitely expected at some point. Potential reform to curb the ability to claim for any injury under a certain value, was perhaps, less so.

One could be forgiven, with these headline grabbing changes, for missing the passing reference in the blue book that accompanies the Autumn Statement, indicating that the Government was also concerned about displacement caused by reform into other areas such as credit hire.

We know government is trying to understand more about the credit hire market prior to the public consultation on reform. Originally due in March, we now expect the consultation to be published in May or June, with options and the cost of vehicle mobility a consideration in any package of measures.

Current concerns fall into two main areas for potential displacement:

• Any appetite of unregulated companies such as CHOs filling the void left by claimant solicitors on claims between the General Damages ban and small claims track limit.
• Inflation being pushed into areas such as hire and repair both in frequency and quantum to supplement lost revenues in the personal injury sector.

In my view, it is simply too early to suggest what form any further review of the credit hire market could take and it is extremely important to understand that, whilst the two other measures are Government policy, in relation to credit hire the Government has not come out with any policy, choosing rather to ask for ideas around potential solutions. Any nailing of colours to the mast at this point would be nothing short of speculation. Whether the Government has an appetite to become embroiled in credit hire reform, given the task they have set themselves with the personal injury reforms together with the added backdrop of the EU referendum, also remains to be seen.

What I do think is important, is for the market to understand with reference to credit hire, that there is a customer / individual who has been left without mobility following an accident. All potential solutions should ensure that those placed in this situation are put back into a position whereby they can go about their daily lives.

It comes as no surprise at this time that the credit hire fraternity are looking to find solutions to the ongoing discussions about GTA rates. Insurers find themselves in the scenario where they are still trying to resolve a rate review for last year, at a point where they would usually start planning for the year ahead.

For many this has again highlighted the fundamental flaw with the protocol and why an increasing number of insurers are frustrated by the process. One can foresee a number of insurers highlighting in consultation to the Government the fact they have been seemingly unable, or at least found it very difficult, to recognise a decrease in rates under the GTA at a time when the legal landscape legitimises it.

I remain a big advocate of the GTA and the infrastructure it delivers when it works well. For example, at Keoghs we pay over 80% of the 35,000 credit hire claims per year we handle within 30 days. I also see the experience of CHOs outside of the GTA in terms of increased frictional cost, longer lifecycles, and the fact that in the main they are now recovering less in damages than those inside the protocol.

Making the process work would be an excellent solution - though I fear we have reached a critical stage in the GTA’s history.

In this quarter’s publication we have included an update on the Keoghs case of McBride v UKI which is being pushed forward by the claimant fraternity as a case attempting to overturn the rate calculation in Stevens v Equity. The appeal was initially refused on the papers in summer 2015, and the requested oral hearing took place on the 21st January 2016.

Coupling the fact that the hearing of the appeal is not listed until February 2017, together with the fact that the CoA refused to grant permission on all but one count (that being the point on the applicable collision damage waiver (CDW)), highlights the likelihood that the Stevens’ judgment will remain with us whatever happens for some time yet.

In response to the claimants’ stance that Stevens was inconsistent with the previous decisions of Burdis and Bent 2, Underhill LJ has referred the permission hearing itself to the CoA in what appears to be an attempt to finally get closure on this issue, rather than leaving it open to another future appeal through the side door.

It is possible the appeal could provide a definition of ‘local and mainstream’ provider. At the time of the oral hearing Underhill LJ struggled with the way this point had been argued, and gave the claimants the opportunity to amend this pleading for the purposes of seeking permission.

McBride will be joined in the Court of Appeal by the case of Clayton v EUI. Clayton was heard a few days after McBride and again deals with the applicability of basic hire rate. Master of the Rolls, Tomlinson LJ, felt that due to the inadequacy of comparable rate evidence from both solicitors before the original trial judge, it would be difficult to support the methodology under which the decision was based, and indeed it would be unsatisfactory for such methodology to become the norm.

The fact that McBride was already heading to the CoA on the point of excess / CDW gave an opportunity for this case to be heard at the same time. Incidentally, this fact was not lost on Underhill LJ in the McBride hearing who had been keen to make Tomlinson LJ aware of this.

In March we were involved in another case in the Court of Appeal called Phillips v Willis. The case was being pursued by the claimant solicitors (Winns) in an attempt to gain a far reaching decision on the method under which credit hire should be settled within the MoJ Portal. Their wish in this instance was unfulfilled. A full alert on the case will be sent to clients in the coming days.

Finally, in the coming weeks we will be sharing our annual 2015 data with insurer clients regarding the credit hire market. On early review we are seeing the true effect of Stevens v Equity with Keoghs’ credit hire spend falling by c.£150 per claim in quarter three and quarter four from where it was in the first half of the year.

The average hire paid to those CHOs sitting outside the GTA is now at the lowest point it has ever been at c.£1,100 per claim in the second half of the year (inclusive of litigated cases). The reality that the courts are applying Stevens’ with regularity does perhaps explain the emphasis being placed on the McBride case, and the indecision we have faced on the run up to the oral hearing.

In recent months we have seen a reluctance of certain CHOs to either settle in line with Stevens or issue at all. We know from various clients they have a similar experience with those CHOs. It is surely a matter of time, given the refusal for permission on the Stevens’ point in McBride, before these cases now start to draw to a conclusion one way or another.

So there is a challenging period ahead for all - thank you for your support and for continuing to read Credit Hire Aware.