Three insurers – including esure and Aviva – have won out in a test case against a credit hire organisation (CHO) regarding the issue of non-party cost orders.
Brought by Keoghs on behalf of the firms, the group action has, the law firm stated, set a precedent that recognises a credit hire organisation as the ‘real party’ for hire chargers claims. This makes a CHO liable to pay the legal costs of the defendant insurer for unsuccessful claims.
“The judgment squarely places CHOs “on the hook” for defendant insurers’ legal costs,” said Gary Herring (pictured), partner and head of credit hire at Keoghs.
“This is not only a victory for the industry but the consumers as well who are often indirect victims. The reality is that the credit hire organisation is the primary beneficiary of and controlling influence over the claim, with the claimant often having little real choice about or influence over the proceedings being pursued in their name.”
Mark O’Donnel, third party indemnity lead at esure commented: “This is a fantastic result, which gives much-needed clarity on cost liabilities, especially when litigation is driven strategically. More importantly, it does show that a collaborative approach between insurers… can help deliver excellent results and adapt claimant behaviour accordingly, in line with esure’s overall goal of fixing insurance for good.”
The case concerned four different claims with the same CHO and involved the same claimant solicitor, both owned by the same holding company. Keoghs brought applications to join the involved CHO to the proceedings and for a non-party costs order to be made. This forces the CHO to meet the costs of each claim instead of the claimants. Keoghs also wanted to join the applications to proceed as a group action due to the significance of the issues.
Evidence demonstrated that the CHO and its holding company were the true drivers and beneficiaries of the claims. This included them exerting a substantial degree of control over the entire process. The judge also heard how impecunious customers were targeted to charge higher rates.
His Honour Judge Saunders ordered the CHO to pay the insurers’ costs in all four cases with the CHO declining to appeal.
“This ruling is significant in that it will hold CHOs to account for driving unnecessary cost and litigation into the motor claims process, and should ensure that the customer is the primary beneficiary of services provided. Enabling insurers to recover legal costs from CHOs for bringing unmeritorious claims should cut the number of such cases, reducing pressure on insurance premiums,” James Driscoll, senior claims manager for motor damage and credit hire at Aviva commented.
“The judgement should go a long way to ensuring that credit hire companies who pursue litigation which is ultimately unsuccessful, are no longer able to escape liability for an adverse costs order. Going forward, we would expect credit hire companies to voluntarily agree to meet a defendant insurer’s costs wherever a liability arises,” Herring added.
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