This cover is called “Loss of Use” or “Car Hire Extension” in most motor insurance policies. You may purchase this cover as an extension to a comprehensive policy. Some insurance companies offer a car replacement at no extra charge for comprehensive policyholders. So, make sure you read your policy carefully.
If you claim for a replacement vehicle under your policy, it is most likely that you will be allowed to hire a car for the period of time your car is actually being repaired. This period of time does not, therefore, include the time waiting for repairs to start. Therefore loss of use due to unavailability of spare parts or service will not be considered.
There will normally be a limit on the car hire fee per day; so make sure you know what this is before you hire a car. You will have to pay any extra amounts yourself (such as deposit on fuel). The insurance policy will also contain a maximum limit of compensation; this is the total amount which the insurance company will pay for the total period of car hire per claim. This cover is available to you whether you are to blame or not for the accident. In the case when you are not to blame for the accident, the car hire expenses will be paid by the other party’s insurance company.
Keep in mind that if you drive a small car, do not expect to rent a 4-wheel drive as replacement vehicle (even if this is for a short time).
If you are insured on third party basis or third party fire and theft basis and been involved in an accident for which you are not to blame then the insurers of the third party would be required to pay you the cost of hiring a car.
Generally, if you are not to blame, you are entitled to request the insurance company of the third party to provide you or refund you with a replacement vehicle not only for the period your vehicle is being repaired but also for the period you may have to wait for the parts to be sourced by the company.
The Maltese Courts have determined that a party who is not to blame for an accident should financially be reinstated in full and has a right to recover the losses and to restore his property to its pristine original state from the guilty party. This also includes reasonable expenses for hiring a rented vehicle car for the period the innocent party’s car is out of action.
However, the Courts have also emphasised that the rights of the person who is not to blame are not limitless and should make every attempt to minimise losses. For example, it would be unreasonable to claim additional rental days if the appointed repairer takes ages to commence repairs for no valid reason. It is therefore important that when claiming reimbursement, one has to prove that it was necessary to hire the replacement car and that the cost was kept to a minimum.
The insurance company should be kept informed at all times in writing of any issues arising from a claim (such as loss of use) and as to any efforts to source parts from any supplier. Therefore you need to inform insurers straight away if you are aware that there is problem in the supply of parts. The person who is entitled to rent a vehicle should request the insurer (in writing) to confirm the maximum amount reimbursable for renting a vehicle per day, against receipt.
Reimbursement for loss of use is not an automatic right but depends on various factors including whether liability is confirmed, and when. An injured party can always claim reimbursement for loss of use by instituting proceedings against the party who caused the accident. In these cases, legal advice should always be sought.
Insurers would not compensate for a hired vehicle when a vehicle is declared beyond economic repair. For new cars (less than 12 months old) most insurers would use a threshold of 60% to declare the vehicle as “beyond economic repair”. This means that if the repair and loss of use costs exceed 60% of the car’s market value then it is not worth repairing it. The older the car is the higher the threshold will be, and this will depend on a number of factors such as the make, age and condition of the vehicle, the type and extent of damage, the availability of parts and the likelihood of complications arising during repairs.