What is credit hire?
Credit hire is the supply of a ‘like for like’ replacement vehicle on a credit basis. This means that the person benefiting from the credit hire vehicle (usually the non-fault party) does not pay for the car hire cost upfront. The cost of the credit hire is then recovered directly from the at fault party’s insurers.
Often credit hire vehicles are arranged through a ‘Claims Management Company’. This means the Pursuer has to make a claim through their own insurance company. A credit hire vehicle will often be supplied while the Pursuer’s own vehicle is being repaired or, if their vehicle is a total loss, until the total loss cheque is received.
A lot of insurers actually refer non-fault claims reported to them by their clients to a credit hire company or a firm of solicitors, like Watermans. Then, they will appoint a suitable credit hire provider.
If the credit hire company is unable to recover their costs from the at fault insurers, a court action is raised in the majority of cases. The credit hire company will appoint a firm of solicitors to recover these costs on the Pursuer’s behalf. The Pursuer should be aware that the court action will be raised in their name. However, the Pursuer will not be liable for any costs incurred as a result of the court action. The credit hire company will reimburse the Pursuer.
Who is ‘the Pursuer’?
The ‘Pursuer’ is the person who has been involved in an accident which is not their fault, and makes a claim against the at fault party.
How can credit hire be of benefit to a Pursuer?
The theory behind credit hire is that the Pursuer should not be out of pocket while their vehicle is off the road following an accident.
If the credit hire vehicle is provided by a claims management company, this avoids the Pursuer having to claim through their own insurers. This can have adverse effects such as having to pay an excess, having an impact on their no claims bonus and potentially their premium if its due for renewal shortly after the accident or the claim takes a long time to settle.
Most credit hire providers strive to ensure that a Pursuer is always kept mobile and will provide a similar vehicle to that of the Pursuer’s promptly in order to minimise inconvenience for them. The aim is to ensure that a Pursuer is not out of pocket and minimise the impact the accident has on their ability to go about life normally.
This is why the Pursuer is entitled to a similar vehicle, as they made need one of a similar size for transporting their family or work purposes. A further benefit is that no money is required up front. The large majority of credit hire companies will only require a Pursuer to sign a ‘rental agreement’ and possibly provide a small deposit to secure the hire vehicle.
What should a Pursuer consider prior to entering into a credit hire contract?
Pursuers should not have to pay any costs and these are recovered from the at fault party however, most credit hire contracts contain a clause whereby if the credit hire provider is unable to recover their costs from the at fault party, they may have recourse against the recipient of the hire.
As such, Pursuers should be truthful in their account of the accident circumstances, as credit hire is often only available to a non-fault party. If a Pursuer is found to be partially at fault, the credit hire company may have grounds to take action against the Pursuer for the costs they are unable to recover.
Pursuers should also be aware of the effects of being offered services directly from the at fault party’s insurer. If a Pursuer is contacted by the at fault party and offered a replacement vehicle, this may render the credit hire company unable to recover their full outlay from the at fault party’s insurers. Pursuers should always make the credit hire company, or their solicitors, aware if they have been contacted by the at fault party’s insurers directly.