Hi, my name is Adam Stewart, Debt Collection Expert and owner of ADC Legal Litigation Lawyers.
Following on my recent article about car crash debt recovery scams from “not at fault” recovery agents, I would now like to talk about what to do if you have received a demand against you from one of these “not at fault” recovery agents, credit hire companies or smash repairers.
How Does it Work?
Recently, we have noticed an increasing number of litigated matters involving credit hire companies. Credit hire companies are essentially rental car businesses that exclusively provide replacement vehicles for customers who were victims of a motor vehicle collision. Often, these companies are affiliated with the panel repairer undertaking repairs to the primary vehicle. They then take advantage of the fact that the at-fault party is insured, often demanding exorbitant amounts for repair costs, assessing, towing, recovery fees and replacement vehicle costs.
These schemes have triggered major concerns within the settlements section of almost all major insurers, underwriters and third party administrators. It is not uncommon to receive a demand in excess of $5,000.00 from a credit hire company for a replacement vehicle when the cost of repairs to the primary vehicle is well under this amount. To make things worse, these companies are usually represented by aggressive, commission-driven, and ethically questionable law firms that will not hesitate to start court action within weeks of a collision, adding even more costs to the claim.
How Do I Deal with It?
From our experience in dealing with credit hire companies, recovery-based repairers and their solicitors, we have come up with the following tips that may help reduce the costs of these claims:
1. Do not ignore the demand. You must respond quickly. Ensure they receive your response and make a record of all your communications. It’s worth seeking their full proof of loss, including any materials which support the demand for any loss of use component at this stage, even if liability is still in dispute.
What to seek in the proof of loss:
- The other side ‘Version and Diagram’;
- Assessment Report or Repair Quote;
- Any photographs in their possession;
- Invoices for repair, tow and salvage.
- Loss of use:
- 3 months’ worth of running sheets (if an income generating asset);
- Hire contract with daily rates and number of days hired.
2. Upon receiving the proof of loss documents, and on the basis that liability is admitted, ensure that you have those materials immediately assessed by a qualified assessor from the same jurisdiction. If you suspect the cost of repairs is inflated, engage an expert motor vehicle assessor to conduct a fair and reasonable assessment on the demands. In addition to holding relevant qualifications, the nominated assessor should ideally be based in the same jurisdiction as where the collision occurred and their assessment report should contain a statement to the effect that they understand and accept the expert witness code of conduct.
3. Promptly respond to all correspondence in writing. The response should clearly state your stance on liability and quantum, and make an unambiguous request to the prospective plaintiff to refrain from commencing legal action to enable settlement negotiations if appropriate. If the other side is legally represented, then remind them that they have a duty to attempt settlement negotiations first before legal action commences.
4. If any portion of the claim is undisputed, send a cheque for that amount immediately, even if this is not prompted by the other party. This may be the amount of damages that is found in your assessment with a reasonable amount provided for loss of use as well. But do not purport the payment to be in full and final settlement (doing so would allow the claimant to reject this payment without consequence). This may mitigate, and even eliminate, the Plaintiff’s entitlement to costs and interest if they go legal, and opens up an opportunity to file a complete defence. Furthermore, it reduces the size of their claim which may make legal proceedings worthless for the Plaintiff.
5. Be aware that if a third party is uninsured, they will not usually be expected to statutorily write off their vehicles even if the cost of repairs exceeds its net worth.
6. Do not pay any additional “legal fees” if legal proceedings have not yet been commenced. Do not pay any “administrative fees”, “recovery fees” or “excess-reduction fees” unless the third party demonstrates exceptional circumstances to justify their inclusion. Towing fees and assessing fees are generally not disputable unless they are truly excessive and/or unreasonable.
7. If legal action has commenced, provide any documents received to your lawyers as soon as possible as ongoing discussions will not delay the Plaintiffs right to seek Default Judgement.
Credit Hire Replacement Cars
Disputing the cost of replacement vehicles can become quite complex. Often, the demand for replacement car costs exceeds the damages on the initial vehicle material to the demand and are for a period which is far longer than the repair time should have taken and for a daily rate which is well over the costs of other vehicles available at the time.
The bulk of these demands result from a credit hire arrangement where the claimant has made no payment to the hire company for the replacement car, but instead has given the credit hire provider the subrogated right to seek recovery on their behalf from the defendant.
Generally, the claimant need only to show a genuine need for the replacement vehicle over the entire claim period, and the daily rate must not be unreasonable in order to be successful in seeking these costs.
However, there are many questions that can be asked to ascertain the validity of the demand prior to payment being made, these include:
- Was the vehicle material to the claim in fact repaired?
- Whether a replacement vehicle was needed for the full period of hire?
- When were the damages paid for the vehicles material to the demand, and why weren’t those funds used to get a permanent replacement as soon as possible?
- What if any, delays occurred with the repair and why? (Have your assessor check these answers).
- Should the vehicle have been ‘written-off’ as opposed to repaired?
- When was the vehicle deemed ‘written-off’ and what was done thereafter to permanently replace the vehicle?
- How long and why was there a delay in seeking damages against the defendant?
- Was a ‘free loan car’ available from the repairer?
- Has the Plaintiff actually made any investigations into the availability of another vehicle at a more competitive rate other than the one hired?
- What make and model of vehicle was hired as compared to the one being replaced?
- What additional items have been added to the daily hire rate which would otherwise not have been needed?
- If you’re a Vehicle hire provider; does your company have a vehicle available for the claimants use while their vehicle is being repaired? (Note: the claimant is not required to take you up on this offer but the court will take note of the offer)
It’s worth remembering that although the credit hire arrangement grants the hire company subrogated rights to seek recovery, that this does not mean that the hirer is free from risk for the hire costs personally. In the event the Court denies the full amount sought from the Defendant, the credit hire company may then seek the difference from the hirer directly which is often not made clear to the hirer when entering into the credit hire contract.
Lastly, if the demand for vehicle hire costs is litigated, we remind you to take those documents to your lawyer for legal advice as soon as possible.
For further information on an individual case, please contact ADC Legal, credit hire companies and their associated repairers/solicitors.
ADC Legal Litigation Lawyers is a legal practice specialising in commercial advice and litigation, debt recovery and insurance claims recovery disputes. For more information, email us at email@example.com or call 1300 799 820. Talk to us about your litigation or dispute concerns via Skype at adclegal.