In my years of practice, I have frequently noted that it is argued that if a claimant is entitled to a courtesy vehicle from their comprehensive insurance, then it is not reasonable for a vehicle to be hired on credit. I have seen literally almost every defence in credit hire plead this issue, though whether it is argued at trial is variable.
If the argument succeeds, then it can lead to a zero award for hire. It is an all or nothing situation. So, it is an important issue which should be taken seriously. Especially with the prevailing economic situation, the issue of comprehensive insurance and credit hire may be raised more. There may be more vigour in arguing that a claimant particularly in large hire claims, under his/her duty to mitigate reasonably, should have availed their comprehensive insurance to obtain a courtesy vehicle, rather than incur hire charges.
This article deals with this topic in the following way:
(1) The applicable law concerning the issue of credit hire and comprehensive insurance, divided into two subsections namely:
(i) “Res inter alios acta” ['A thing done between others']
and
(ii) the duty of a claimant to act reasonably.
(2) Summary of competing arguments from the claimant and the defendant.
(3) Are there any higher court cases specifically dealing with the specific factual situation?
(4) Examples of county cases which have been decided on the issue.
(5) My comments on the above county court cases in the context of my experience.
(6) So, is a failure to use a comprehensive insurance policy a failure to mitigate?
(7) Conclusion
There are largely two elements to consider here, namely:
(i) “Res inter alios acta” ['A thing done between others']
and
(ii) the duty of a claimant to act reasonably.
(i) “Res inter alios acta” ['A thing done between others']
In Bradburn v Great Western Railway Co (1874-75) L.R. 10 Ex. 1 - 6 November 1874. In summary it was held in an action for injuries caused by defendants' negligence, a sum received by the plaintiff on an accidental insurance policy cannot be taken into account in reduction of damages. It was stated that:
“The plaintiff is entitled to recover the damages caused to him by the negligence of the defendants, and there is no reason or justice in setting off what the plaintiff has entitled himself to under a contract with third persons, by which he has bargained for the payment of a sum of money in the event of an accident happening to him. He does not receive that sum of money because of the accident, but because he has made a contract providing for the contingency; an accident must occur to entitle him to it, but it is not the accident, but his contract, which is the cause of his receiving it.” - Pigott B.
It was also stated that:
“...that the plaintiff is entitled to retain the benefit which he has paid for in addition to the damages which he recovers on account of the defendants' negligence.” - Bramwell B.
So let me give an example to simply explain this: Party A has accidental insurance cover that if s/he breaks his/her leg in an accident, s/he will be entitled to a payment out of £5,000 for the injury. Party A however also sues the defendant responsible for the injury to his/her leg and argues that according to the Judicial College guidelines they are entitled to £15,000. Following the case of Bradburn v Great Western Railway Co, the defence is not able to argue that the claimant is only entitled to £10,000 from them, as £5000 has already been paid by the accidental insurance company. The claimant is entitled to the £15,000 plus the £5000 under the accidental insurance cover, that is £20,000. So, whilst the claimant is getting extra for the injured leg, the courts have decided that public policy is such that the claimant is entitled to have that extra monies.
Otherwise, the position would be that a person in this example would be in a worse position than someone who did not bother to get an accident insurance policy. Party A in this example would get a total of £20,000 (£15,000 from the defendant and £5000 from his insurance company); however, he would also have paid perhaps a lifetime of premiums! Another person who does not have this policy would get the £15,000 from the defendant and yet s/he would have paid no premiums for insurance. “Why should the plaintiff be left worse off than if he had never insured?”- Parry v Cleaver [1970] A.C. 1, 14)
The above case of Bradburn is old, but this approach has been endorsed in later cases: Parry v Cleaver [1970] A.C. 1, Smoker v London Fire Authority [1991] 2 A.C. 502 at 539B–F.
The Duty of a Claimant to act reasonably
Tort [Chapter 26-09, Clerk and Lindsell, 24th edition]:
“The claimant is under a duty to mitigate the losses resulting from the defendant’s tort.(Damages are equally not recoverable for such losses as the claimant has actually avoided by taking action subsequent to the tort... Furthermore, he will not be allowed to recover for any losses which, though he did sustain, he might reasonably have avoided.” - underline is my emphasis only.
In Lagden v O’ Connor (EWCA Civ 510, 4 December 2003) it was stated in paragraph 34 that the defendant:
“is entitled to demand that, where there are choices to be made, the least expensive route which will achieve mitigation must be selected. So, if the evidence shows that the claimant had a choice, and that the route to mitigation which he chose was more costly than an alternative that was open to him, then a case will have been made out for a deduction.”
So, a claimant must mitigate his or her losses, so that the least expensive route is taken.
Where the claimant has taken comprehensive insurance and is entitled to a courtesy vehicle, the claimant will argue that this should be ignored for the purposes of a hire vehicle. It's the “fruits of an insurance policy” and pursuant to Bradburn and Parry v Cleaver, the fact that the claimant could have obtained a courtesy vehicle should be irrelevant. Afterall the claimant may have for example paid for 10 years' worth of comprehensive insurance; so why should a tortfeasor (the defendant) assert that the claimant must utilise his/her insurance policy? This is in law called: “Res inter alios acta”. It is a Latin phrase that means "a thing done between others". The fruits of an insurance policy are to be disregarded. This is based on public policy more than anything else. In other words, put simply public policy dictates that: it's none of the defendant's business what benefits s/he was accruing or could have accrued from an insurance policy. Lord Reid in Parry v. Cleaver [1970 A.C.1,14] stated: "moneys coming to the plaintiff under a contract of insurance” should be disregarded.
The defendant will however argue that this doctrine of “Res inter alios acta” does not extend to a comprehensive insurance policy which provides for a courtesy vehicle. The cases of Bradburn and Parry v Cleaver dealt with different situations. The case of Bradburn was dealing with an accident insurance policy – it was a 19th century case when the Consumer Credit Act 1974 was not to be passed for another 100 years. The case of Parry v Cleaver dealt with pension premiums that were akin to an insurance policy. Neither case involved a comprehensive insurance policy and credit hire.
The defence may even cite Dimond v Lovell ([2000] 2 All ER 897). and refer to the House of Lords comments that: “The truth is that virtually all compensation is paid directly out of public or insurance funds and that through these channels the burden of compensation is spread across the whole community through an intricate series of economic links.” Dimond v Lovell was not dealing with the topic of comprehensive insurance, but one of the issues they were dealing with is whether the defence was entitled to examine the enforceability of the credit hire agreement between Mrs Dimond and the hire company, or not? They concluded that they were. The same conclusion was reached in the Court of Appeal case of Salat v Barutis ([2013] EWCA Civ 1499) in which I personally appeared, in respect of cancellation notices, namely that the defendant was entitled to look at whether cancellation notices were provided to the claimant by the hire company. The comments of the House of Lords in Dimond v Lovell that virtually all compensation is effectively paid by the “community” could equally apply to the comprehensive insurance situation, it could be argued.
However, before one gets carried away with the argument, one must not forget that the House of Lords in Dimond v Lovell reiterated that the “fruits of insurance” was an exception to the “double recovery” rule – so in other words you can get over compensated, if you have insurance for that situation! So, the claimant would argue that a courtesy vehicle provided under a comprehensive insurance policy were precisely the “fruits of insurance” and therefore should not be counted in. The situation of Dimond v Lovell was such that it was dealing with whether a defendant could take advantage of the “unenforceable” agreement. Salat v Barutis was dealing with whether a court could look at whether cancellation notices had been provided to the claimant, the absence of which would have rendered the credit agreement “unenforceable”. These cases were not dealing with the “fruits of an insurance policy” which is specifically referred to in Bradburn and Parry v Cleaver
The claimant could separate to the point of “Res inter alios acta” argue that in any event it was not reasonable to expect the claimant to rely on his/her comprehensive insurance policy, as it could lead to higher insurance premiums and a policy excess for him/her. This is not reasonable mitigation but was over and beyond what could be reasonably expected from the claimant in his/her duty to mitigate.
The defence could in turn argue that it was entirely within the claimant's duty to mitigate. Afterall the Court of Appeal in Lagden v O’ Connor was clear that the claimant should choose the “least expensive route” to mitigate. The claimant may have to pay a policy excess of let's say £250 and quite possibly his/her insurance premiums may increase, but does that justify for example £50,000 hire charges? Is this the “least expensive route”? The higher the hire charges are, the more attractive this argument begins to become.
Are there any higher court cases specifically dealing with the specific factual situation?
There is no binding higher court decision, which specifically deals with the situation where a claimant has comprehensive insurance which offers a courtesy vehicle and the claimant declines the courtesy car and instead hires a vehicle.
There was however a brief reference to reliance upon a comprehensive insurance policy in the Court of Appeal case of Zurich v Umerji [2014] EWCA Civ. 357. This was a case about impecuniosity, but Lord Justice Underhill (paragraph [43]) commented:
"The point is an interesting one and plainly of some general importance. But I do not believe that we should consider it on this appeal…But I do not think that the issue can be treated as one of pure law which can be decided in a factual vacuum. Even if the Appellants' case that the Claimant should have claimed on his policy is not precluded as a matter of principle –– as to which I express no view –– it would be necessary to consider the full circumstances, including the terms of the policy as regards excess and/or no claims bonus, before we could reach a view as to whether he had acted reasonably in not doing so. None of this was explored in evidence. This battle will have to be fought, if insurers are so inclined, on another field."
So, the Court of Appeal declined to impart their views on the issue.
There are no binding decisions specifically dealing with whether a claimant should avail themselves of a courtesy vehicle under their comprehensive insurance policy, rather than incur hire charges. There are however a number of lower court decisions which deal with the issue. These are non-binding cases. I will briefly summarise some of the cases, starting with cases that have been decided in the claimant’s favour and then those decided in the defendant's favour.
In Trevor Rose v The Co-operative Group [7th of February 2005 (unreported)], it was held that the principles of Parry v Cleaver applied to the situation whereby the claimant could have availed a courtesy vehicle under the terms of his comprehensive insurance. It was irrelevant whether the claimant knew or ought to have known that he had a choice of a courtesy car, as this was a factor to be effectively disregarded.
In Glover v Emerson Developments Ltd ([2001] 4 WLUK 356) it was held by the District Judge that the claimant had not failed to mitigate his loss by not utilising his own policy; there was no obligation upon him to do so and he was reasonable in not wanting to incur the policy excess.
In Seddon v Tekin ([2001] GCCR 2865) HHJ Harris held that the defendant should not be able to take advantage of the claimant's own insurance policy to reduce his own loss. The judge also pointed out that if the claimant did take advantage of his own insurance company to get a courtesy vehicle, then his insurance company could recover the cost from the defendant anyway. Anyone familiar with the history of credit hire would know that HHJ Harris was a very experienced judge in dealing with credit hire cases!
In Perehenic v Deboa Structuring [1998] 7 WLUK 84 Held, granting judgment for P, that there was no obligation on a claimant to avail himself of a policy of insurance in order to mitigate his loss. P acted perfectly reasonably in proceeding through the credit hire company rather than incurring a substantial policy excess up front and losing his no claims bonus for several months.
In Madhavji v Consort [1999] 8 WLUK 237 it was held that the claimant was under a duty to use the indemnity provided by her insurance company, thus mitigating C's potential liability. The claimant was insured on a fully comprehensive basis subject to a £100 excess with a protected no claims bonus.
In Bucknall v Jepson [[1998] 9 WLUK 51 B's fully comprehensive motor insurance policy provided for a free replacement vehicle, but B did not check the details of his policy after the accident, nor did he make enquiries of his broker or his insurance company as to the possibility of a free replacement car. Held, disallowing the hire claim in full, that although the burden upon B was not great, he should have considered J's interests as well as his own when mitigating his loss. It would have been reasonable for B either to read his insurance policy or enquire of his broker or his insurance company as to what facilities were available under the policy, but he had failed to do so.
The above are merely examples of some decisions at the county court decision, which are not binding in any way.
The above county court cases may give the impression that as a “snapshot”, it is a fairly level playing field on how these types of cases are decided. However, from my experience, the point that the claimant should have relied upon a comprehensive insurance policy and availed himself or herself of a courtesy vehicle is usually not successful. From my experience, when the defence at trial starts exploring the issue of whether a claimant should have relied upon comprehensive insurance, often the judge makes their views known that the point is not a strong one.
So, what explains some of the reported county court cases in which not availing a courtesy vehicle under comprehensive insurance was deemed a failure to mitigate? One needs to take into account that such cases are not binding decisions. They are decisions at county court level only. County court cases that suggest that not using a comprehensive insurance policy is a failure to mitigate may be considered as “outlier” cases. In the vast majority of cases, courts are not prepared to accept that failing to use a comprehensive insurance policy is a failure to mitigate. Obviously as this is the usual position in court, there may be more of a temptation for the winning party to report a county court case that involves a court finding that failing to use a comprehensive insurance policy is a failure to mitigate, rather than the other way around.
In my view:
The established cases of Bradburn and Parry v Cleaver clearly state that the “fruits of insurance” are not to be taken account of. A comprehensive insurance policy which provides for a courtesy vehicle is undoubtedly the “fruits of insurance”, so falls under “Res inter alios acta” ['A thing done between others'] - these are matters which are to be disregarded largely for public policy reasons. This line appears to have been taken by the majority of courts, from my experience.
Some courts, however, albeit a minority, have found that a comprehensive insurance policy can be taken into account – from my experience this, however, is not the norm. My understanding is that the courts that conclude this are not saying that if a claimant has a comprehensive insurance policy which provides a free courtesy vehicle, then this automatically means that a claimant has not mitigated. Rather they are stating that this can be considered a failure to mitigate depending on all the circumstances of the case. Therefore, claimants should be vigilant and therefore they should be in a position to explain why they did not utilise their comprehensive insurance policy. The stakes are surely very high, as it is literally an “all or nothing” situation.
It is much hoped that this article provides some clarity to the reader on this very important topic.
Please note this article does not constitute legal advice for any specific case or cases or for any other situation.
© Mohammed Azeem Ali 2024 9th of December 2024