Level and scale of fraudulent or exaggerated credit hire taxi claims reinforces concerns first raised early in lockdown but confirms landmark principles laid down in Hussain v EUI

Horwich Farrelly has saved insurers over £127,500 after successfully defending four taxi credit hire claims that appear to reinforce concerns they had raised in the spring that these types of cases would only increase as a result of the economic downturn taxi drivers were expected to experience due to the lockdown.

Highlighting that this has now become a specialist area with disproportionality and exaggeration of loss often in play, Horwich Farrelly co-head of Credit Hire, Darren Mendel said: “As we predicted, the lockdown has provided an additional layer of defence to such claims given the lack of opportunity to work by taxi drivers generally. Indeed, we continue to see taxi claims being presented – many of which can be a real challenge to investigate as there is often an overlap between credit hire and fraud. As such however, we work closely with our fraud teams to combat these claims and the cases here highlight our collaborative approach.”

The first case, Khalid Mahmood v AXA, saw a £27,000 credit hire claim dismissed after the judge followed Hussain v EUI and the claimant, who had hired a replacement Audi A8 at the time of the accident at an eye-watering £620 a day for 44 days, failed to evidence loss of profit.

The case proceeded to trial in August 2020 at Watford County Court and here, although Deputy Circuit Judge Maloney found in Mr Mahmood’s favour in terms of liability, he debarred him from relying on impecuniosity.  In cross examination, the claimant also expressly admitted that the sole reason for hire was business use so, with no evidence of loss of profit – and as laid out in Hussain v EUI – the credit hire claim was dismissed in its entirety.

Speaking on this case, Mendel, said: “Historically persuading a judge that a claimant should be limited to loss of profit when claiming taxi credit hire charges was no easy task. Since the Horwich Farrelly case of Hussain v EUI however, insurers are now in a much stronger position and the onus is clearly on the claimant to show they meet one of the three exceptions if they are to recover credit hire or even basic hire rates. This case also illustrates that claimants risk being awarded nothing at all if they fail to disclose profit and loss accounts and tax returns in the course of litigation.”

The second case, Zeb v EUI Limited, saw the claimant hire a Mercedes Vito taxi for 202 days in 2018/19. With a daily hire rate of £368 the total hire claimed was a staggering £76,266. With storage and recovery of almost £4,500 however, this brought the total to an almost unbelievable £81,000.

Despite EUI issuing a pre-accident value cheque for £17,257 in September 2018 however, hire continued until February 2019. As well as successfully arguing that the cheque should have been banked when received, Horwich Farrelly also ensured the claimant, who was a director/owner of a small local taxi firm, was also limited to recovering loss of profit pursuant to the decision in Hussein v EUI; itself a Horwich Farrelly case.

Darren Mendel said: “We initially pitched an offer of £19,000 to conclude the claim and outlined all of our concerns but this was at first countered with an offer of £65,000 by the claimant’s solicitors. After standing our ground and embarking on some productive negotiations a compromise was reached at £24,500 for hire, storage and recovery.”

Two further cases, Mohammad Khaliq v EUI Limited and Hassan Bangura v EUI Limited, achieved combined savings of over 95%.

In Khaliq, the length of hire again appeared excessive – 84 days totalling over £26,500 – alongside repair costs of £2,565. As the claimant declared he was not impecunious, strict proof in relation to his need for hire was made by Horwich Farrelly. As he also declined to put forward a claim for the notional loss of profit, the firm’s credit hire specialists, applying the principles of Hussain v EUI, made a Part 36 offer based on basic hire rate evidence for a standard non-plated vehicle which could be used by the claimant for his social and domestic needs.

The case proceeded to trial at Bradford County Court in August 2020 and here, District Judge Hickinbottom accepted she was dealing with a profit earning chattel and that, therefore, the starting point was loss of profit. Highlighting that no evidence had been presented by the claimant regarding needing to maintain contracts however, she ruled he was unable to rely on this as a justification for claiming the cost of a plated vehicle. Likewise, she ruled the need for a replacement vehicle for social and domestic use be limited, as per Hussain v EUI, to spot rates for a private vehicle only. In light of these findings, the claimant was awarded just £2,192 for hire – less than the insurers Part 36 offer – which meant he had to bear the majority of the costs of the claim itself.

In Bangura, the claimant sought to recover credit hire charges for a replacement taxi for a period of 67 days. This amounted to£20,527 together with a personal injury claim and associated losses.

When Horwich Farrelly reviewed the claimant’s financial disclosure however, it was clear they had access to additional banking facilities and income, both of which had not been disclosed. This led the firm to make a successful application to debar the claimant from relying on impecuniosity due to failure to provide full disclosure. As a consequence, the claim for credit hire charges was dismissed entirely.

Speaking on all the cases, Mendel said: “For insurers, the importance of following the principles laid down in Hussain v EUI when assessing a taxi driver credit hire claim cannot be overemphasised. A claimant who fails to show genuine need to hire a taxi rather than claiming for the loss of profit (assuming they are prepared for their earnings to be scrutinised) will be limited to the cost of a non-plated vehicle where they do nonetheless need a replacement vehicle for social and domestic use.

“Moreover, where there is not that need for a plated vehicle, damage which might render such a vehicle unsuitable for private hire use, may nevertheless make it perfectly suitable to be used pending repair/payment of any PAV for social and domestic use. In light of the drastic reduction in private hire usage caused by the COVID-19 pandemic, taxi driver claims for replacement vehicles should continue to be the subject of close scrutiny by insurers.”