The High Court has refused an application by a credit hire company for special leave to appeal a significant ruling that favoured motor insurers, bringing a closely watched case to its conclusion.

The insurance industry has long complained that credit hire companies – which supply rental cars to not-at-fault parties after crashes and then recover their costs from the at-fault drivers’ insurers – inflate claims by charging higher than standard rates.

In McKnight v Miller, RAC Insurance had agreed to reimburse credit hire company Compass the “reasonable cost” of a hire car, but declined to pay more.

A magistrate initially found in the insurer’s favour, but Compass won an appeal.

Earlier this year, the WA Supreme Court overturned that appeal and reinstated the original ruling, but Compass sought to appeal again.

This week the High Court declined that application, bringing the saga to a close.

MD at Ligeti Partners Lawyers James Mulcahy says the ruling could have national repercussions.

“For motor insurers in WA, the law is now settled, meaning there is certainty as to how the court will approach these claims,” he told insuranceNEWS.com.au.

“Non-compensable benefits, which form a significant financial component of credit hire costs, can generally not be recovered. The main exception to this will be where a claimant is impecunious.

“For the rest of the country, the decision is undoubtedly significant, and the extent to which the various other states are obliged to follow the WA approach is likely to be debated in the coming months.”

He says the decision impacts the viability of credit hire companies because they rely on charging higher rates to fund additional benefits and make a profit.

“If the McKnight approach is now widely adopted, it will mean a significant portion of a credit hire company’s rate of hire now needs to effectively be abandoned.  

“Credit hire companies will likely need to accept offers from insurers based on ‘mainstream’ prices, notwithstanding they will continue to incur the expenses of providing the additional benefits. All of this would seem to make their business models far less sustainable.”

Mr Mulcahy says insurers should continue to make provision of rental cars to claimants a “seamless experience”, and claimants should ensure they are dealing with insurers directly.

See the WA Supreme Court ruling here, and the High Court decision here.

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