This case was an appeal from District Judger Brownlee’s decision to award the Plaintiff the sum of £852.82 in respect of care hire charges. There were essentially two issues before the High Court:-
Had the Plaintiff failed to mitigate her loss by hiring a vehicle through Independent Car Hire Limited under a credit hire agreement instead of availing of the use of a courtesy car which was available to her under her comprehensive policy of insurance.
The court held that there was NO obligation on the Plaintiff to mitigate her loss by using a courtesy car rather than hiring a replacement vehicle. The Plaintiff could not be required to invoke her contractual entitlement on foot of her insurance policy for a courtesy vehicle.
The Second issue was if the Plaintiff did owe £852.82 or any other sum of MIS Limited/Independent Car Hire Limited.
The court considered that she DID NOT. Stephens J considered that MIS/Independent Car Hire Limited had failed to act in the Plaintiff’s interest rather than their own commercial interests and as the Plaintiff’s “agents” had breached their duty to the Plaintiff. Accordingly they were unable to recover any sum from the Plaintiff on foot of the credit hire agreement.
1. Background
The accident circumstances were not in dispute. On the 28th October 2007 the Defendant collided with the Plaintiff’s unoccupied stationary vehicle. The vehicle, a two door Peugeot 206, was rendered unroadworthy. The Plaintiff hired a replacement vehicle, a Ford Honda Jazz for 24 days whilst her vehicle was being repaired. The daily rate for hire was £29.20 together with a delivery charge of £25.00 plus VAT.The Plaintiff held comprehensive policy of insurance with Prestige Underwriting Services through Open and Direct Insurance, her insurance brokers. The Court found that the Plaintiff had “unwittingly entered” into a “second insurance policy” with Motor Insurance Services Limited (MIS) for legal expenses. The Plaintiff had believed that she was purchasing one comprehensive insurance policy from Prestige Underwriting Services Limited at all material times and was unaware that she had paid a £10.00 claim line fee as the insurance premium for this second policy. The documentation sent to the Plaintiff enclosing her insurance policy contained an additional MIS “leaflet”. It provided the Plaintiff with a Claims Helpline Service Number together with the instruction that “all potential claims must be initially reported to our Claims Helpline Services”. The court found that the inclusion of the leaflet by Open & Direct Insurance was not at the instigation of the comprehensive insurers, Prestige but as a result of a separate commercial arrangement between Open & Direct Insurance and MIS.
The Court considered that MIS provided the Plaintiff with “a one stop Claims Management Service”. If she was involved in a road traffic accident for which she was not at fault then she was to contact MIS by the telephone number provided on the leaflet. They would notify her insurers (although she was unaware that they do this) they arrange for the repairs of the vehicle, appoint Solicitors on her behalf to pursue the Third Party driver and their insurers and arrange for the hire of a replacement vehicle.
2. Courtesy Vehicle:
The day following the subject accident the Plaintiff contacted MIS using the number on the enclosed leaflet. She explained that the accident was not her fault; she was asked whether she needed a car and she indicated that she did. She was informed “that it would all be sorted out”. She was advised that a car would be provided and the vehicle would be collected for repair. The Plaintiff gave evidence that at this stage she thought that she was going to be provided with a courtesy vehicle. MIS Limited duly notified Prestige of the accident. On the same day they sent a fax to Wrights Accident Repair Centre (one of their approved garages), giving them details of the Plaintiff’s vehicle and instructions to repair it. The fax also notified Wrights that a courtesy car was required. Prestige had an agreement with Wrights wherein Wrights would provide a courtesy vehicle, where requested, free of charge to their insured whilst their vehicle was being repaired. A courtesy vehicle was included in the Plaintiff’s comprehensive policy of insurance. The Plaintiff gave evidence that she was not aware that this was a benefit of her insurance policy.On the same day however MIS contacted Wrights and advised that the Plaintiff did not require a courtesy car. The Plaintiff was unaware either that her own insurer had instructed Wrights to authorise a courtesy vehicle or indeed that MIS Limited had instructed Wrights not to do this on her behalf. The following day Wrights arranged for the Plaintiff’s vehicle to be collected from her home and a car hire vehicle delivered. She was provided on her doorstep with an Independent Car Hire Limited vehicle hire agreement, credit hire agreement and ABI general terms of agreement mitigation questionnaire. She was asked to sign these documents. She was given no proper opportunity to read the documents prior to signature. The Plaintiff conceded at this point that she was aware that she was not receiving a courtesy vehicle and was in fact receiving a hire vehicle. She was reassured however that this was the way things operated and she felt that she had no other option but to just go for it. It was accepted that the hire documentation was not between the Plaintiff and Independent Car Hire Limited. The Plaintiff gave evidence that it had not been explained to her that she was entitled to a courtesy car under her own insurance policy. If it had been explained to her then she gave evidence that she would have accepted the courtesy car (the Plaintiff’s own car was a Peugeot 207 and Wrights would have provided a similar two door small car as a courtesy vehicle). The court accepted that, generally speaking there were limitations with these courtesy vehicles; generally they were small 2 door vehicles and may not be comparable to the insured’s own vehicle. This did not apply in this case.The Plaintiff stated she had not been aware under the terms of the ABI Mitigation questionnaire that she could become personally liable for paying hire costs which she would not have incurred if she had used a courtesy vehicle available to her from her own Motor Insurers. 1. Was there a failure on the Plaintiff’s part to mitigate her loss by availing of the use of a courtesy vehicle? The court considered that there was no obligation on the Plaintiff to mitigate her loss by using a courtesy car rather than hiring a replacement vehicle. It was held that the Plaintiff could not be required to invoke her contractual entitlement on foot of her insurance policy for a courtesy vehicle. Mr Justice Ben Stephens relied on the Judgement of Nicholson LJ in McMullan –v- Gibney [1999] NIQB 1, Parry –v- Cleaver [1970] AC 1, and Diamond –v- Lovell. Accordingly, MIS Limited, as the Plaintiff’s agent also had no obligation to invoke this contractual term on the Plaintiff’s behalf. In effect therefore Mr Justice Stephens agreed with the decision of Her Honour Judge Brownlee in this regard.
3. Breach of “Agents” Duty
Mr Justice Stephens however went on to consider the second and crucial element of this decision and that was whether the Plaintiff owed £852.82 or any other sum to Independent Car Hire Limited and/or MIS.Mr Justice Stephens held that MIS were instructed by the Plaintiff as her agents. He did not specifically advise how he arrived at this conclusion. It was accepted that MIS Limited fully owned Independent Car Hire Limited. Mr Justice Stephens therefore made no distinction throughout the remainder of his Judgement between the two companies. He considered that MIS Limited/Independent Car Hire Limited had a commercial interest to hire a vehicle to the Plaintiff. There was an interest of this agent to make a financial profit by hiring the car to the Plaintiff. Mr Justice Stephens considered in the circumstances that the commercial interests of the agent conflicted with the Plaintiff’s interest in adopting a course of action which did not put her at a financial risk. There was therefore a conflict of interest. In accordance with the law established in Image View Management Limited –v- Jack [2009] EWCA Civ 6 “ an undisclosed but realistic possibility of a conflict of interest is a breach of your duty of good faith to your client”. Mr Justice Stephens quoted that “the Plaintiff, if she had been informed by her agent of the conflict, would not have dreamt of exposing herself to a financial risk”. Accordingly, they failed to act in the Plaintiff’s interest rather than their own commercial interests in these circumstances where “as a question of fact” the Plaintiff would have taken a courtesy vehicle if properly informed.
The Court held therefore that as a result of this breach of duty MIS Limited/Independent Car Hire Limited was unable to recover the car hire charges from the Plaintiff. Therefore the Plaintiff was not entitled to recover any sum from the Defendant. The Appeal was therefore allowed.
4. CommentWhilst the outcome of this is certainly positive from a defence insurance company perspective there are a number of points that remain unclear from this Judgement:-
Are MIS Limited/Independent Car Hire Limited able to recover any sum under a credit hire/credit excess agreement with the Plaintiff where MIS Limited have failed to disclose that they may commercially profit from the Plaintiff hiring a vehicle regardless of the position of a courtesy vehicle.
Is MIS Limited/Independent Car Hire Limited as an agent only obliged to disclose this commercial interest in circumstances where there is a potential conflict i.e. where the Plaintiff:-
Is entitled to receive a courtesy vehicle under a comprehensive policy of insurance.
Would be willing to avail of this courtesy vehicle if it was offered over a car hire vehicle. (In these circumstances one has to consider the type of vehicle that would be offered as a courtesy vehicle against the Plaintiff’s own vehicle).
3. Will the principle of agency extend to other “accident management companies” or is this restricted solely to the unique (second insurer) position of MIS Limited.
One would anticipate that further litigation will be required to clarify the position.
One point is however clear from this Judgement and that is that a Plaintiff will not be in breach of their obligation to mitigate their loss by failing to avail of a courtesy vehicle under the comprehensive policy of insurance.