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McBride v UK Insurance Ltd [2017] EWCA 144

Case Comment by Alex Orndal

The Court of Appeal have handed down the latest judgement in the latest long running battle between motor insurance companies and credit hire agencies. It is anticipated the judgment in these conjoined appeals will have a significant impact on the calculation of basic hire rates insofar as it confirms the judgment in Stevens v Equity and addresses the significance of the lack of 'nil excess' in comparable basic hire rate evidence.

The Facts and Issues

In McBride, the court was concerned with the hire of a Jaguar XK 5.0l for a period of 77 days at a total cost of £40,215.11.

The judge at first instance held that the Claimant did have a need to hire the vehicle, that it was reasonable for him to hire the particular vehicle that he did for a period of 74 of the 77 days claimed. On the question of rate, the court dismissed the Defendant's rates evidence on the basis that there was no evidence of the cost of reducing the excess to nil. He therefore applied the lowest rate supplied by the Claimant leading to judgement of £19,980.


In Clayton, the court faced hire charges for a BMW M3 and a Mercedes E350 as a replacement for the Claimant's 1973 Ford Mustang over a 52 day period. The total charges amounted to £24,823,20. At first instance, the Claimant's rate evidence had not been admitted due to procedural errors on the part of the Claimant. As such, the court was left with the Defendant's rates evidence which provided comparable rates for 28 day periods only. The comparable rates did not offer 'nil excess'. In a judgement that was described as 'hectoring and offensive' [1] the judge awarded the lowest of the 28 day rates provided by the Defendant, but, applied a 15% uplift to adjust for the fact the rate should have been a 7 day rate, and a 10% uplift to reflect the absence of a 'nil excess'.

Whilst each case had a list of differing grounds of appeal, the salient issues the court dealt with were:

1. Whether Stevens v Equity was correctly decided.

2. The approach the court should take when the comparable BHR evidence did not provide for a 'nil excess'.

3. How the court approach a case where it only has rates for 28 days when 7 days was more reasonable.

Judgement

The court made short shrift of the Claimant's submission that Stevens v Equity was wrongly decided and provided an analysis of how Stevens v Equity was consistent with previous credit hire authorities. It firmly upheld the approach that the relevant BHR is the lowest reasonable rate quoted by a mainstream (or local reputable) supplier. The court dismissed a separate argument that the rates used in McBride were not from mainstream suppliers equally swiftly.

The court then proceeded to deal with the more contentious issue of how the court should approach the assessment of the BHR when the comparable rates did not provide for 'nil excess'. The starting point for the court's analysis appears to be that 'it will almost invariably be the case that it was reasonable for the claimant to seek a nil excess for the reasons given in Bee v Johnson.'[2]

However, the court rejected the submission by the Claimant that the absence of a comparable rate which offered nil excess meant the court had no reasonable comparator. Instead, LJ Flaux set out the following principle in paragraph 76:

"[W]here a nil excess is not available from car hire companies, the correct approach is to treat the nil excess separately from the comparison exercise between the default credit hire rate and the basic hire rate with an excess."

The court therefore endorsed a two stage approach. The first step is to calculate the BHR from the rates evidence provided by the parties in accordance with the approach in Stevens v Equity, ignoring the question of 'nil excess'. The second question for the court will then be how much, if anything, should be recovered as the cost of purchasing a nil excess. The sum of these two calculations provides the comparable BHR for the court to consider the reasonableness of the Claimant's credit hire claim.

As to the second stage of that exercise, LJ Faux highlighted several sources of evidence of the cost of 'nil excess' in the index cases including the CDW provided by the credit hire company, the charges levied by other hire companies within the rates provided and alternative standalone insurance products such as Questor and Insurance4carhire.com.

In the case of McBride the court calculated the cost of 'nil excess' as an additional £10 per day, which was based on the credit hire company's own collision damage waiver rate. In Clayton, the court allowed the rate allowed at first instance of about £17 per day to stand on the basis that it was comparable to the rate offered by the credit hire company (£17.50), Thrifty (£12), Europcar (£14).

It should be noted that whilst the court did not apply the rates of any standalone insurance products in the index cases (due to the hire not meeting the criteria in the terms and conditions in McBride, and due to the evidence not being before the court in Clayton), their use was specifically endorsed in paragraph 105 of the judgement:

“I consider that where there is evidence of the availability of an excess elimination insurance as a stand-alone product from Questor or other providers such as Insurance4carehire.com, the Courts should admit and accept such evidence as evidence of the reasonable cost of obtaining a nil excess, provided of course that the quote obtained from such a provider is for a car which is comparable with the one hired from the credit hire company and is for the same period as the period of actual hire from the credit hire company...The admission and acceptance of evidence of these standalone products should be the norm.”

The court of course noted that in cases where the comparable rates did provide a nil excess this two stage process would be unnecessary because the cost of nil excess will already be brought into account.

The final issue considered by the court was whether the court had erred in applying a 15% uplift to the rate provided to reflect that the rate was for 28 days when it was reasonable for the Claimant to enter into hire at a 7 day rate. This issue was only live in the case of Clayton.

The court ultimately determined that given the exercise was one of a reasonable approximation, the judge had been entitled to use his considerable experience to reach a decision he had as to rate the uplift to the rate. 

Application in Practice

The ruling is victory for motor insurance companies in two material respects.

Firstly, the emphatic endorsement of the approach in Stevens of the lowest reasonable comparator provides certainty and clarity in the calculation of the BHR on terms favourable to motor insurers. 

Secondly, the judgement removes the argument usually made by credit hire companies that an evidenced rate is not comparable because it does not provide for a nil excess. In cases where the Defendant had failed to provide a comparable rate with nil excess the court would often previously simply say that the Defendant had failed to prove a lower comparable was available to the Claimant and therefore allow the claim in full. Defendants can now remedy such a deficiency in the evidence by relying on standalone insurance products, evidence of CDW from other hire companies, or even the cost charged by the credit hire company themselves for nil excess.

When considering standalone insurance products, Defendants must ensure that any evidence provided makes it clear that they would apply to the hire claim in question. This should include inter alia that the insurer would be suitable for the particular type of vehicle hired, a person of the claimant's age or circumstances and that it would cover the duration of the hire period.

It should be noted that whilst the court approved the 15% adjustment made by the court to reflect the absence of 7 day rates evidence, it provides little guidance on the approach the courts will take in similar cases moving forward. The only hard or fast principles set out is perhaps that the absence of a rate for a particular duration of time will not in and of itself be fatal to the Defendant's case. However, an insurer who fails to provide rates evidence for a particular time period that the court may think reasonable is potentially opening itself up to the whims of the particular judge hearing the case.

[1] Para 20
[2] Para 76


Alex Orndal regularly appears for Defendant's in trials, disposal hearings, stage 3 hearings and small claims hearings in cases involving credit hire.
For further information or to arrange training for your firm on the questions raised in this article please Email Alex Orndal