The NSW Court of Appeal has handed down decisions in four cases regarding the assessment of damages concerning credit hire vehicles.

As insuranceNEWS.com.au has previously reported, insurers have long been critical of credit hire firms, which offer replacement vehicles to not-at-fault drivers after an accident, with the promise of recouping the cost from the at-fault party’s insurer.

Insurers argue credit hire firms often charge excessive rates, pushing up the cost of claims which results in higher premiums for everyone.

A series of cases came before the NSW Supreme Court last year which looked at, among other things, the entitlement of not-at-fault drivers involved in collisions to hire prestige vehicles.

In those cases, the Supreme Court rejected the idea that there is an entitlement to an equivalent prestige replacement compared to the not-at-fault driver’s own damaged vehicle, and confirmed damages are to be assessed by reference to past usage considering the vehicle’s functionality.

The cases were later appealed to the Court of Appeal, with that court handing down its judgment yesterday.

In a 2:1 majority, the Court of Appeal rejected the approach taken by the Supreme Court and instead endorsed an approach that looked at the past usage, and also included a consideration of the specifications of the damaged vehicle.

The Court of Appeal found claimants are only entitled to recover the cost of hiring reasonable replacement vehicles, and the market rate for such vehicles should be the measure of damages.

But it was split as to whether vehicle owners are entitled to recover damages based on an equivalent vehicle, or whether any replacement vehicle which satisfies the owner’s use is sufficient.

Spencer Pascal and James Mulcahy, Principal Lawyers at Ligeti Partners, successfully acted for two of the respondents and their insurers. Mr Pascal told insuranceNEWS.com.au the ruling has implications for insurers.

“This is an important industry decision as there are currently no other Court of Appeal judgments in the country dealing specifically with the credit hire industry,” he said.

“This decision will guide decision-makers in the lower courts, where most of the decisions are heard.”

Mr Pascal says the Court of Appeal confirmed hirers are limited to recovering the reasonable cost of a replacement vehicle, and that excessive or inflated amounts will not be permitted. But there are still conflicting views over whether the replacement vehicle should be equivalent to the one damaged.

“There was disagreement from the Court of Appeal over the correct legal approach,” he said.

Mr Pascal says it remains to be seen how the ruling will impact other states, or whether there will be a further challenge to the High Court.

Click here to read the full judgment.