An at-fault driver is liable for losses agreed in advance between a claimant and her hire car company, the Supreme Court has ruled. 

In Armstead v Royal & Sun Alliance Insurance, judges unanimously found that claimant Lorna Armstead could recover from the driver’s insurer the sum she was liable to pay the hire company for loss of use.

The claimant had been issued a car by Helphire after being involved in a road accident in 2015. She was then struck by another car while in her hired vehicle and received a bill for Helphire’s lost rental income while it was repaired.

The Court of Appeal had held in March 2022 that the at-fault driver’s insurer RSA was not liable for the lost rental income, saying this was a sum due from a contractual obligation between Armstead and Helphire. The amount at stake was just £1,560 but the decision had consequences for a significant number of other cases and raised fundamental questions about applying the tort of negligence.

Lord Leggatt and Lord Burrows, giving the lead Supreme Court judgment, said it would be ‘unduly burdensome’ to require a claimant to have to rebut all the ways they should be compensated for a loss.

‘Once it has been proved that the defendant has committed a wrong which has caused loss to the claimant, it is fair to place the onus on the wrongdoer to show a good reason why the wrongdoer should not be liable to compensate the victim for the full extent of the loss caused,’ they added.

The dispute centred around the clause in the rental agreement which stated that Armstead was contractually liable to pay Helphire for any loss of use. The Court of Appeal had concluded that the clause was too ‘remote’ to be recovered by Armstead from the at-fault driver. The Supreme Court’s ruling effectively means the insurer rather than Armstead has to pay this sum and established that the burden of proof over remoteness is on the defendant. 

Following the ruling, Peter Jerman, managing director of the claimant’s firm Principia Law Ltd, said the decision provides important guidance to practitioners on the burden of proof.

‘The UKSC analysis is that once a claimant has proved that a tort has been committed and that the loss claimed was caused by the defendant’s breach of duty, it is for the defendant to assert and prove any of the defences which might be said to apply so as to limit damages recoverable.’

Anthony Hughes, chair and chief executive of the Credit Hire Organisation, the trade body for the credit hire industry, said the decision establishes a principle of ‘good law’ in the event of a loss, which overrides economic arguments. ‘The ruling is a fair outcome for the recovery of reasonable losses resulting from a loss that, as with credit hire overall, contributes very little to the overall cost of insurance,’ he added.