The High Court has recently determined that drivers of a BMW and an Audi A3, involved in accidents where the drivers were not at fault, are entitled to recover costs for hiring equivalent prestige vehicles while their cars were off the road during the completion of repairs. These cases establish very important changes to existing entitlements and will set a precedent for car owners who want to claim the cost of hiring equivalent vehicles if they are involved in an accident. Attwood Marshall Lawyers Commercial Litigation Associate Georgia Taylor, discusses insurance disputes, damages, and the impact this decision will have on motor vehicle accident victims and insurers in the future.
Background
Historically, it used to be that you could only claim the cost of a replacement hire car if your car was damaged in an accident and you needed your vehicle for work (e.g., a taxi, work ute, delivery van etc). The law has come a long way since then.
In 2019 the NSW Supreme Court determined that a claimant’s entitlement to compensation for a non-income producing replacement vehicle is to be assessed regarding the type of vehicle that could have satisfied their needs. The Court found that compensation represents the inconvenience suffered from the deprivation of use, rather than temporary use of a vehicle of equivalent value or prestige.
That decision was appealed.
On appeal, the Court dismissed the opinion that reasonableness must be assessed by only considering what vehicle would meet the inconvenience factor. Instead, the Court determined the loss inflicted from being unable to use a prestige vehicle required more consideration. Emphasis was placed on the loss of use of the vehicle’s features, including safety features, level of luxury, and prestige. A claimant now has the right to hire a ‘broadly comparable’ substitute vehicle.
This decision reiterates the position previously set out in Anthanasopoulos v Moseley (2001) 52 NSWLR 262. The amount of damages relates to the market rate of hiring an equivalent replacement vehicle. Insurers will no doubt see a rise in the number of claims for luxury or higher category hire cars because of this decision.
Insurers should also consider when attempting to recover insured losses that this decision will help establish that ‘need’ is not confined to the satisfaction of bare necessities.
The cases of Arsalan v Rixon and Nguyen v Cassim
The much-awaited judgment of Arsalan v Rixon and Nguyen v Cassim [2021] HCA 40 by the High Court of Australia is a landmark decision in motor vehicle property damage litigation including a claim for a replacement hire car.
The decision will impact the industry, particularly property insurers of defendants in motor vehicle collisions.
This is how these cases unfolded:
Mr Rixon and Mr Cassim were involved in separate motor vehicle collisions. Each owned ‘prestige vehicles’, being an Audi A3 and BMW 535i, respectively. By way of their insurers, the defendants accepted liability for the collisions.
Through a third-party credit hire company, Mr Rixon and Mr Cassim hired an Audi A3 and a Nissan Infiniti Q50. The insurers of the parties at fault had argued that the drivers of the Audi and BMW 535i didn’t need similar cars, and the costs paid should be based on the rental of a Toyota Corolla.
The Local Court of NSW had initially found that the Audi driver, who had hired a replacement car of the same make and model for $12,829.91, was only entitled to recover $4226.25, that being the market rate for a Toyota Corolla. On the other hand, the BMW driver had the right to claim $17,158.02 for hiring a Nissan Infiniti Q50.
The cases were heard separately in the NSW Local Court and eventually appealed. The Court heard the appeals concurrently and the NSW Supreme Court found that the plaintiff’s usage, as opposed to the choice of vehicle, was the right measure in determining whether the expense was reasonable. An appeal of the decision was made to the Court of Appeal and it was held that the hiring cost of an equivalent vehicle to the damaged vehicle was the correct determinant of damages.
Practically speaking, this decision settles the often-conjectured debate about a plaintiff’s entitlement to a ‘like for like’ vehicle, particularly that of a prestige vehicle. However, additionally, the Court has conveniently settled and outlaid the correct heads of damage for deciding on claims of this nature, namely ‘physical inconvenience’ and ‘loss of amenity’.
Insurers will now need to focus on the plaintiff’s mitigating the loss. However, the Court accepted cases where a plaintiff may not have the right to a replacement rental vehicle. For example, in circumstances where the plaintiff is abroad, hospitalised, or could not have replaced the damaged vehicle from the idle stock of the plaintiff’s fleet of vehicles.
While the plaintiff is entitled to a ‘like for like’ vehicle, there is still a possibility to question the replacement vehicle’s comparability. However, insurers can and should continue to assess the rate and duration of hire when responding to such claims.
Impact of judgment
In a unanimous joint judgment, the High Court dismissed the appeals. It held that a plaintiff deprived of their vehicle due to the defendant’s negligence has the right to damages representing the appropriate costs of hiring a substitute vehicle broadly comparable to their own damaged vehicle.
In doing so, the High Court determined the correct measure of damages for such claims. This issue has been at the centre of motor vehicle litigation for many years.
The Court considered that the often-cited principle of ‘loss of use’ was inadequate and insufficient, inappropriately reflecting the plaintiff’s loss for the deprivation of their vehicle.
The Court held that to appropriately consider the consequential losses suffered by a plaintiff because of the damage to their vehicle, the accurate ‘heads of damage’ on physical inconvenience and loss of amenity of use is relevant. These heads were adequate in identifying the nature of which the loss of use of a chattel adversely affected a plaintiff and provided recognition that a plaintiff’s deprivation of convenience and enjoyment of using a vehicle is relevant when assessing the damages.
Additionally, in a significant shift in consideration of damages, the Court revoked the requirement for a plaintiff to demonstrate a ‘need’ for a replacement vehicle. The Court contemplated that ‘the concept of ‘need’ was a deterrent from the primary focus upon the heads of damage recognised by the plaintiff.
The Court identified that the onus of proof in establishing these heads would not be overly challenging to discharge as it held that ‘it will usually be sufficient for a plaintiff to identify a past suite of purposes of the damaged vehicle’. Additionally, and more relevant to the notion of a loss of utility of a ‘prestige’ vehicle, the Court held that it was adequate for a plaintiff to ‘infer that they derive utility from the numerous functions used in their vehicle, particularly an expensive prestige vehicle’.
Impact on insurers
The High Court decision sets out that the insurer should recognise the loss of amenity and the physical inconvenience in viewing damages, but “need” is a very uncertain concept and to be circumvented.
The High Court has stated that a plaintiff will often be able to recover from a negligent defendant the appropriate costs incurred in hiring, for the period of repair, a substitute vehicle that is broadly equivalent to their damaged vehicle.
Insurers have been critical of credit hire firms for quite some time, arguing they often charge exorbitant rates in offering replacement vehicles to not-at-fault drivers, with the promise of recouping the cost from the at-fault party’s insurer.
Attwood Marshall Lawyers – how we can help
Attwood Marshall Lawyers Commercial Litigation team have extensive experience in resolving disputes against insurance companies. We aim to help you resolve your dispute and reduce some of the stress in your life. If you have had an insurance claim denied, contact our team at the earliest opportunity to obtain preliminary advice in relation to your rights. We will be able to advise you on your reasonable prospects of succeeding in your claim.
Contact Commercial Litigation Department Manager Amanda Heather on direct line 07 5506 8245, email aheather@attwoodmarshall.com.au, or free call 1800 621 071 at any time. You can visit our experienced team at any of our conveniently located offices atRobina Town Centre, Coolangatta, Kingscliff, Brisbane, Sydney, orMelbourne.
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We saw far too many motor vehicle fatalities and serious accidents last year.
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