Keoghs has a secured a significant judgment against a credit hire organisation (CHO) on the issue of non-party costs orders.
The result of the group action, which was brought by Keoghs on behalf of three leading insurers, has set a persuasive precedent which recognises a credit hire organisation as the ‘real party’ to claims for credit hire charges. This makes them liable to pay the legal costs of the defendant insurer for unsuccessful claims.
Commenting on the case, Gary Herring, Partner and Head of Credit Hire at Keoghs said: “The judgment squarely places CHOs “on the hook” for defendant insurers’ legal costs.
“This is not only a victory for the industry but the consumer 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’Donnell, Third Party Indemnity Lead, esure said: “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, facilitated by Keoghs, can help deliver excellent results and adapt claimant behaviour accordingly, in line with esure’s overall goal of fixing insurance for good.”
The case itself concerned four separate claims with the same CHO and also involving the same claimant solicitor, both of which owned by the same holding company. In partnership with three leading insurers, Keoghs brought applications to join the CHO involved to the proceedings and for a non-party costs order to be made, forcing the CHO to meet the costs of each claim instead of the claimants. Keoghs also sought to join the applications to proceed as a group action, given the common factors in the claim and the significance of the issues.
Considerable evidence was heard demonstrating that the CHO and its holding company were the true drivers and beneficiaries of the claims including that they exerted a substantial degree of control over the entire process. Among the evidence provided by Keoghs, the Judge also heard how impecunious customers were deliberately targeted as a tactic to charge higher rates.
Finding in favour of Keoghs, HHJ Saunders allowed the applications and ordered the CHO to pay the insurers costs in each of the four cases. The CHO involved declined to appeal.
James Driscoll, Senior Claims Manager – Motor Damage and Credit Hire, Aviva, said, “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.”
Gary Herring added: “The judgment 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.”