Defendant Solicitors

On April Fool’s Day BLM posted guidance, presumably to their insurer clients and others, about the steps they should take to deal with credit hire claims which were either incepted during the current lockdown or which were already on hire. The advice is available online at https://www.blmlaw.com/news/credit-hire-and-covid-19 and I have posted the link on the CHO LinkedIn website. The advice is as follows:

“As the COVID-19 pandemic continues to affect all areas of our lives, an area of litigation that warrants consideration at this time is credit hire claims. In a timely revision of the Civil Procedure Rules, the 113th update – entering force on 6 April [see CPR, 16 PD] – includes specific provisions dealing with the “hire of replacement vehicles following a road traffic accident”, which reinforce the requirement for claimants to plead to specific matters: (1) the need for the replacement vehicle; (2) the period of hire claimed; (3) the rate of hire claimed; (4) the reasonableness of the period and rate of hire; and (5) impecuniosity, where relied upon.

Whilst many are following the Government’s advice and “stay[ing] at home”, there will invariably be fewer vehicles on our roads reducing the likelihood of road traffic accidents, which should lead to fewer bona fide claims (no doubt compounded by the difficulties credit hire organisations (CHO) may experience mobilising fleet during lockdown). Nonetheless, the value of those claims intimated is expected to rise owing to increases in the periods replacement vehicles are out ‘on hire’, for example because inspections and/or repairs cannot be completed, albeit consideration should be given to whether desktop inspections have now become attractive.

Compensators should, therefore, be prioritising claimants based on their need, with key workers being ranked over claimants who are furloughed or working from home because premises are temporarily closed. As a consequence of schools being closed, limited non-essential travel could readily be resourced where claimants’ households already have access to a single vehicle. Whilst the question of need has, historically, been a relatively low threshold, this pandemic means that defendants should once more be scrutinising claimants’ needs to enter hire.

Arguably, the case for insurers to promote intervention to claimants – per (1) Copley v Lawn / (2) Maden v Haller [2009] EWCA Civ 580 – has never been stronger. Those with established repair networks that are, even partially, operative may be best placed to offer (i) replacement vehicles for (prolonged) hire, or (ii) repair services; even temporary repairs may allow claimants to return to the road, pending more permanent solutions. Where claimants’ vehicles remain roadworthy, then any hire period should be limited to the repair period only and, in light of the prevailing circumstances, it is arguable that entering into hire before a garage is able to undertake any repairs is entirely unreasonable, resulting in damages being limited accordingly.

Compensators with, currently, no functioning repair or hire network might consider making a global offer for the loss of use claim, or exploring the commercial costs of cross-hiring vehicles or procuring taxis to cover ad-hoc trips for high priority claimants such as key-workers. Note that whilst many larger garages have temporarily closed and are furloughing their workforce, many smaller self-employed garages are operating with business as usual.

Finally, with many UK businesses experiencing cash-flow worries, credit hire companies appear much more amenable to accepting commercial offers, not least because a number of compensators have temporarily suspended interim payments leading to reduced settlements. As previously indicated, with the value of claims expected to spike, owing to extended periods of hire, compensators should ensure that well-pitched Part 36 offers are made to either avoid litigation entirely or provide them with sufficient costs protection, given that COVID-19 hire claims will likely exceed the small claims track threshold.”

This kind of advice, from defendant solicitors to their insurer clients, was always inevitable. I recall that when Morgan Cole discovered Autofocus, they issued similar guidance to insurers which implicitly highlighted the potential financial benefit to insurers of not settling claims within the GTA. Their recommendation was to wait until the protocol had lapsed and compel the CHO to pursue the claim outside of the GTA, at which time they raised their various defences and deployed their evidence in support. This new advice from BLM has some striking parallels, especially the suggestions about Copley compliant intervention letters in relation to claims which are being pursued through the GTA.

I can report that I have been notified of insurance claim staff who were previously focused on settling credit hire claims in the GTA, now being re-directed to telephone Claimants currently in-hire, to query with them, their need for a replacement car. Doubtless, those telephone calls will have been recorded and doubtless, many of you will be oblivious to them taking place. It may, therefore, be an opportune time to email to all those client’s currently on hire to recommend they do not to engage in conversations with the third party or their representatives. Equally, it remains important to have fully documented the basis on which each Claimant merits being in hire even if that is because repairs to their car cannot continue and it is impossible for you to collect the hire-car because of the consequences to your own business, perhaps because of the lack of resources or the risks faced by your employees in being asked to collect vehicles that are potentially contaminated.

I would also suggest that The CHO trade body must step up and determine whether insurers are following the guidelines suggested by BLM (and probably other solicitors) to the extent that insurer behaviour under the GTA protocol deteriorates.

The message to insurers during the Autofocus years was to avoid settling claims where it appeared that the Court could be persuaded that the Basic Hire Rate was lower than the GTA rate. Not only did that result in a reduction in the number of claims settling in the GTA, it also increased friction and frustration and inspired mass litigation which, again, defendant solicitors took advantage by recommending Part 36 offers which would either force the CHO to settle on sub-optimal terms or result in adverse costs orders when the claim eventually settles at trial, if the judiciary but the arguments about need.

I can narrate quite clearly what happened with Autofocus; there was a deliberate policy, developed by defendant solicitors, to stifle CHO cash flows. They stopped settling claims in the GTA and invited litigation, they stopped making interim payments and then, as cash flows started to squeak, they made low Part 36 offers intending that CHOs would take them to remain commercially viable.

So, is that likely to be part of the plan today? In answer to that rhetorical question, I would look no further than the final paragraph in the BLM release:

Finally, with many UK businesses experiencing cash-flow worries, credit hire companies appear much more amenable to accepting commercial offers, not least because a number of compensators have temporarily suspended interim payments leading to reduced settlements. As previously indicated, with the value of claims expected to spike, owing to extended periods of hire, compensators should ensure that well-pitched Part 36 offers are made to either avoid litigation entirely or provide them with sufficient costs protection, given that COVID-19 hire claims will likely exceed the small claims track threshold.”

The thought that strikes me whilst writing this note is that there are two connected but wholly different issues facing CHOs.

The first is adherence to the GTA, compliance with the protocol and a determination to hold the insurance industry, or those that subscribe to the GTA to account. That requires nothing more than each CHO reporting to The CHO trade body where there is a deviation, and The CHO accepting that feedback from CHO subscribers, sharing those concerns with other members and acting quickly to communicate with the GTA Technical Committee. The aim must be to alert the technical committee of the failure of any insurer to adhere to the process and, if necessary, support the CHO in making a complaint. That takes time and that is why speed is essential in identifying the aberrant behaviour and calling it out. It is why you elect representatives to the ABI GTA Technical Committee, and it is what they are there to do on your behalf.

In the absence of that process being effective – and after 10 years when I was Chairman of The CHO and far longer sitting on The ABI GTA Technical Committee, I don’t think it will be effective, the second issue is how do those representing CHOs best manage any impending challenge to the settlement of claims.

In the likely event that more claims will be disputed, offers will be pitched unrealistically low and solicitors, like BLM, will be encouraging insurers to invite litigation. Their motivation is purely financial – defendant solicitors proposer where there is conflict. So, at a time when many CHOs may be facing cash flow difficulties, what does the plan look like and how should it be met? In truth, I do not think that is an issue for the CHO trade body. Not only do all CHO members have different aims, different relationships with insurers and different priorities, they also have different approaches to litigation. The only real common feature is that you all want to win, and that is why there needs to be some consideration about the impending threat, created if insurers delay settling claims in the GTA to adopt the strategy proposed by BLM.

In quite simple terms, I think that the role of the CHO trade body expires the moment a claim falls out of the GTA. At that point, a different forum becomes more relevant, a forum capable of acting in the same way that FOIL act for insurers. A forum where best practice in litigation, where solicitors engage on a common collaborative basis, where challenges are managed, and spurious defences addressed, with a coherent and uniform focus that currently does not exist within those solicitors that represent CHOs. Insurers, and those that act for them, have managed to write new law because they have decided what they wanted to change and then set about changing it with a clear and common purpose. They are at it still with Part 2 of the whiplash reforms and the various briefings they are given to the press about the cost of credit-hire.

I will write some more about this on Tuesday; I have an idea about something that might work. I thought that I had been out of the industry for too long to add value here but, after speaking to five or six CHOs, nothing has really changed. Insurers still despise the credit hire industry but, they also recognise that there is no more economically practical alternative. Consequently, they have become accustomed to supporting the GTA as a mechanism for controlling the behaviour of the industry. I have an expression that I use quite often; I might be confused but, on this issue, I do not think that I am wrong. The time is ripe for some creative thinking even if it simply promotes a dialogue. Waiting for BLM, Keoghs and DAC Beachcroft to define the future of individual CHOs by the adoption of tactics that did so much harm in the Autofocus years, is not the best plan for any CHO for the future.

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