Tuesday, 3 September 2013
VALUING LOSS OF USE OF A BUS
In West Midlands Travel Ltd v Aviva Insurance UK Ltd  EWCA the Court of Appeal ruled that the conventional ‘standing charge’ basis used for quantifying the loss of use of a commercial vehicle was not appropriate for fleet vehicles that can be replaced by others held in reserve. Under the traditional 'standing charge' approach, the damages include a notional sum for various overheads notionally associated with the operation of the vehicle, including even the cost of running its staff canteen!
West Midlands operated a large number of buses. It was unable substantiate any actual loss of profit as it always had a number of vehicles kept in reserve. Rather than adopt the traditional kitchen sink approach, the court decided to base its award on an amount equivalent to the interest on the notional capital value of the vehicle plus an allowance for depreciation. This reduced the loss of use claim by two thirds!
My full case commentary will be published in the Autumn edition of BPILS Quarterly Update.