Failure by Spectra Drive to insure a credit hire vehicle leads to claim being dismissed on the grounds of illegality

Executive summary

The claim arose out of a minor road traffic accident where liability was not disputed. Shortly after that accident, the claimant entered into a credit hire agreement with Spectra Drive. The company hired a car from Hertz Accident Support Ltd and sub-hired it to the claimant. The defendant invited the claimant to produce documentary evidence to demonstrate that she was insured to drive the car during the hire period. She produced two certificates, viz. a certificate which covered her to drive the vehicle involved in the accident and a certificate issued by an insurer to Hertz Accident Support Ltd.

The key issue

In respect of the insurance position, the defendant argued that:

i. The claimant was not insured under her own insurance to drive the hire car as the certificate expressly precluded that;

ii. The claimant was also not insured under the certificate issued to Hertz Accident Support Ltd as that only permitted them or any legal person that directly entered a self-drive hire contract with Hertz Accident Support Ltd to drive;

iii. In contravention of s.143(1) Road Traffic Act 1988, the claimant was not insured to use the hire car and the hire claim was thus founded on illegality; and/or,

iv. The claimant had no reasonable need to mitigate any loss of use of her car by hiring a vehicle which she could not lawfully use on the road.

The claimant contended that she was unaware of any illegality and any such illegality was res inter alios acta and collateral to the tort, meaning that it did not affect the recoverability of the charges.

Judgment

At trial, the judge decided the illegality argument as a preliminary issue. Having analysed the insurance documents, he was not satisfied that the claimant was covered by an insurance policy to drive the hire car. He then accepted the defendant’s arguments and concluded that the driving of the hire car was illegal. The hire claim was dismissed.

Comment

This is a significant win for the insurance industry. If a claimant does not ensure they have effective motor insurance, they cannot recover their credit hire charges.

Driving without insurance is a strict liability offence and it cannot be consistent with public policy for the court to award charges during a hire period in respect of which a claimant is not insured against third party risks. 

If you have similar cases involving Spectra Drive or other CHOs where the insurance position is in doubt, please feel free to contact us for assistance.