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Published 14 January 2021
We constantly talk about how vehicle hire and damage is an ‘ever evolving area’. This phrase has never rung more true than it does at the moment, with 2021 being set for a year of unprecedented change.
In this article we look at five key areas which are likely to impact you in the upcoming months, and more importantly, we address what you can do to ensure you’re fully prepared to embrace the future changes which are coming.
Three and a half years post the UK voting to leave, it has finally happened; From January 1st 2021, the UK is no longer part of the European Union.
Although extremely close the wire, a deal was finally done, meaning there will be no extra charges on goods traded between the EU and the UK. As such, there should be no inflation on the cost of vehicles or vehicle parts coming in from Europe. There will however be extra checks at borders, including safety checks and customs declarations. Most businesses should be ready for this, so there should be no long term detrimental impact on repair or hire periods. However, many manufacturers are currently reporting backlogs at the border due to the issues in Dover before Christmas when crossings were suspended. This. combined with potential delays at customs whilst everyone gets used to the new processes required, may result in some part delays for the initial couple of months. That said, we know the majority of garages and manufacturers were stockpiling parts last year due to the concern that a deal would not be done. As such, by the time the supplies run out, everything at the border should have calmed down and the delays should be negligible.
Potential inflation may come from countries with whom the EU previously had deals where the UK has not yet been able to enter into an agreement. Before Brexit, the UK was automatically part of any trade deal the EU reached with other countries. When the UK left, the EU had approximately 40 trade deals covering more than 70 countries. So far, the UK has made deals to continue trading in the same way with 60 of these countries, meaning there should only be limited vehicles or parts which do not fall under a trade deal. If you are being told by a third party representative that part costs have increased due to Brexit, ensure you are checking where the part originated from and whether the country is part of a trade deal. A full list of the agreements can be found at: https://www.gov.uk/guidance/uk-trade-agreements-with-non-eu-countries
Ultimately, due to the deal reached, the impact Brexit will have on the vehicle hire and damage arena should be limited compared to the potential inflation and delays expected had no deal been reached. The additional checks and declarations may delay the provision of parts in the short term (have stockpiles not been obtained) but we do not expect any increases to be significant.
This will of course need to be monitored, with any inflation or parts delays being blamed on Brexit being questioned.
We have heard this week that the long awaited Civil Liability Act is now due come into force in May 2021. However, the Pre action protocol and accompanying rules have not yet been published, meaning it is still difficult to prepare for how the new process will work in practice.
This week’s announcement confirms the governments ongoing commitment to the reforms, and the fact it has only been put back a month should provide confidence that they will materialise . We envisage the Protocol will be available from the end of February with the Rules and Practice Direction to shortly follow thereafter. As soon as the rules are published, we will provide further guidance and support to ensure you are as fully prepared as possible.
From a vehicle hire and damage perspective, credit claims of all types (including hire, repair and rehabilitation) do not currently fall within the new portal. However, it is envisaged there will still be an opportunity to bring these loses in before proceedings are issued. The new rules will be required to see how this will work in practice.
In addition to Part 1 of the Act coming into force, responses from the Government are expected at some point in the future on the proposed extension of the fixed recoverable costs regime, and on part two of the consultation on ‘Reforming the Soft Tissue Injury (‘whiplash’) Claims Process’ which covers issues such as credit hire and rehabilitation.
Whatever the rules say, and regardless of whether a response to Part two is published, it is inevitable that the Act will have a huge impact on the vehicle hire arena, and will remain a focus for us in the year ahead.
Despite initial concerns, when the country first went into lockdown in March, the majority of credit hire organisations were extremely reasonable, and wanted to work in collaboration to ensure claimants vehicles were repaired and back on the road as quickly as possible. That being said, there were some who seemed to want to exploit the situation, and kept claimants in hire for indefinite periods without notifying the at fault insurer. No opportunity was therefore presented to assist the Claimant with mitigating their loss.
With the UK now back in national lockdown, we expect these behaviours to be repeated by a limited number of credit hire organisations. It is therefore vitally important that the lessons learnt in the first lockdown are remembered:
Ultimately, due to the learnings from the first lockdown, the impact now should be curtailed. In addition, the Courts are remaining open, so there will be limited impact on litigated claims.
Hopefully, once this lockdown is at an end, the vaccine would have had such an impact that no further national lockdowns will be required. However, if the tier system remains, it will be important for claims teams to know the various rules in each tier, and how this may impact any ongoing hire claim.
Late last year, we started to see the claims from the original lockdown litigating, with some being well into the six figures. The higher value claims have tended to result from where payments were made for repairs or vehicle replacement but no steps were taken to ensure the Claimant was out of hire (i.e. to check if repairs were being done or replacement vehicles had been purchased).
When querying with claimant solicitors as to why the claims are so large, we are being told garages were shut or Claimants were unable to purchase replacement vehicles. We are disputing this and raising all the challenges we discussed in our previous updates (such as need and the fact that some garages remained open). Many claimants have accepted these arguments and we have achieved reduced settlements as a direct consequence. Some claim will inevitably proceed to trial and so we should have some judicial guidance on the Courts appetite for Covid claims shortly.
We will update you as to the judicial appetite as soon as outcomes are known, as this will help you to revise your ongoing strategies in relation to Covid lockdowns.
Over the last few years we have seen a continued increase with the cost of third party repairs. There is no suggestion this is due to change anytime soon, with inflation reaching double digits in 2020. Some of this is inevitable, with the fall in the pound and general inflation. However, we are continuing to see average repair costs for certain companies rise more steeply than others, with no apparent explanation as to why. This inflation is mainly coming from increases in sundry elements, and for some entities, the charges are almost double the standard ABP rates.
We have developed a new strategy for challenging excessive repair costs, which cannot be deemed as ‘reasonable’. We will be continuing to monitor and analyse the courts appetite for these arguments and we will be working with our clients to develop an ‘end to end’ strategy, bespoke to your needs, to ensure maximum success in raising these challenges and keeping the cost of repairs down.
We will be discussing all of the above topics and more at our upcoming virtual workshop on 24th February 2021. An invite for this event will follow shortly.
Our vehicle hire and damage team deal with cases like this on a regular basis. If you would like to discuss any of the above issues further, or require support with your strategies, please do not hesitate to contact us.
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