Zurich Insurance Plc v Umerji

A claimant may recover replacement vehicle hire charges only so far as the expenditure was reasonably incurred. Reasonableness is conventionally assessed by reference to need, rate and duration.

Impecuniosity is the same concept whether it is relied upon to justify credit hire rates or a longer period of hire. A claimant who needs to rely upon impecuniosity to justify the amount claimed must plead and prove it. An unqualified order debarring reliance upon impecuniosity therefore applies for all purposes.

It may be reasonable to retain and store a damaged vehicle while allowing the defendant’s insurer an opportunity to inspect it. Advisers should notify the insurer promptly that charges are accruing and impose a clear deadline for inspection.

The claimant’s car was written off in a road accident. He hired replacement vehicles on credit for 591 days and incurred hire charges exceeding £95,000, together with recovery and storage charges. The other driver’s insurer was joined as a defendant after judgment on liability had been entered in default.

Before the quantum trial, the claimant failed to comply with an order requiring him to confirm whether he relied upon impecuniosity. He was consequently treated as debarred from relying upon it. Mr Recorder Alldis nevertheless held that the order concerned credit hire rates only and did not prevent impecuniosity from explaining the duration of hire. He awarded £101,559.36, including hire charges for most of the 591-day period and storage charges.

The insurer appealed against the awards for hire and storage. The principal issues were whether the debarring order prevented reliance upon impecuniosity to justify the duration of hire, whether the claimant should have claimed under his comprehensive insurance, and whether the storage period was reasonable.

1. The appeal was allowed in relation to hire charges and dismissed in relation to storage charges. The claimant was entitled to hire charges only until 8 March 2011, being two weeks after the damaged vehicle was disposed of. The amount of damages was to be agreed on that basis.

2. The order debarring the claimant from relying upon impecuniosity was unqualified. An assertion that a claimant could not afford to buy a replacement vehicle is a claim of impecuniosity just as much as an assertion that ordinary upfront hire was unaffordable. The order therefore prevented reliance upon impecuniosity to justify either the rate or the duration of hire. Although a clear order might exceptionally be read differently to reflect a demonstrated common understanding, there was no sufficient basis for doing so here.

3. A replacement vehicle hire claim is a claim for expenditure incurred in mitigation of the primary loss of use. The claimant bears the burden of pleading and proving that the expenditure was reasonably incurred. Where impecuniosity is required to justify the amount claimed, the claimant must plead and prove it. The distinction drawn below between using impecuniosity as a sword in relation to rate and as a shield in relation to duration was unsound.

4. It was reasonable to await an assessment of whether repair was economic and to give the insurer an opportunity to inspect the vehicle. The claimant could reasonably wait until its disposal on 22 February 2011, but should then have bought a replacement within two weeks. Hire charges after 8 March 2011 were therefore irrecoverable.

5. The court declined to decide whether mitigation required the claimant to claim under his comprehensive insurance. The point had not been pleaded or properly explored in evidence. Its determination required consideration of matters such as the policy excess and any effect upon the no-claims bonus, so it could not be decided in a factual vacuum.

6. The Recorder was entitled to find the storage charges reasonable. The insurer had received the engineer’s report, which disclosed that daily charges were accruing, and had failed to respond to two chasing letters. Advisers should nevertheless give prompt notice of accruing storage charges and set a clear deadline for inspection and disposal.

Sir Robin Jacob and Moses LJ agreed with Underhill LJ.

1. Court of Appeal (Civil Division): The insurer’s appeal was allowed in relation to hire charges. Recovery was limited to the period ending 8 March 2011. The appeal concerning storage charges was dismissed: [2014] EWCA Civ 357.
2. Manchester County Court: Mr Recorder Alldis awarded the claimant £101,559.36, including hire charges for most of a 591-day period and storage charges. The Court of Appeal varied the hire award but upheld the storage award.