McBride v UK Insurance Ltd  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
The Facts and Issues
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.
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'  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
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
3. How the court approach a case where it only has rates for 28 days when 7 days was more reasonable.
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.'
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
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
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
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
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.
 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