Planning for Profit
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Assessing Loss of Use
A Recurring Inquiry From Readers is for a Fair Basis for the Calculation of an Insurance Claim Following an Accident
WELSH operator states that one of his vehicles has been involved in an accident and as a result has been out of commission for about three months. He adds that his insurance company has asked for a statement of loss of earnings of this vehicle, which is a rigid eight-wheeled oiler. The operator asks for advice as to the method of compiling the claim relative to such items as depreciation, tyres, licences and wages. As a first step it would be advisable to analyse both the revenue and expenditure of the vehicle in question for, say, the three months immediately prior to the accident. From this analysis the current average rate of profit can then be determined.
During the period whilst the vehicle was under repair the whole of the five standing costs, namely licences, wages, rent and rates, insurance and interest on initial outlay would still have to be met. Incidentally in these days of full employment, • it is assumed that it would not be a practical proposition to stand off the driver of the vehicle involved in the accident until it was back on the road. In a large organization temporary duty may bc found for such a man, for example in the garage and although the best use may be made of his services the amount of wages so paid could reasonably be included in any claim made on account of the accident.
A S regards depreciation, however, for the comparatively short
period of three months, it is debatable whether a sound basis for a claim in respect of this item of operating costs can be substantiated. In any event, as depreciation is dealt with on a mileage basis in "The Commercial Motor" Tables of Operating Costs it is therefore included as one of the five items of running costs, none of which can be said to be incurred whilst the vehicle is laid up on account of an accident.
The addition of the total standing cost incurred during the period whilst the vehicle was off the road, to the amount of profit earned over a similar period immediately prior to the accident, should then form the basis for a claim for loss of use on account of an accident.
As an example of the likely costs involved, the following extract from Table Three of "The Commercial Motor" Tables of Operating Costs is given. In respect of a rigid eight-wheeled oiler, with a carrying capacity of 16 tons, the five items of standing costs per week are estimated as follows:—licences £2 8s., wages £10 5s. 2d„ rent and rates 13s. 4d., insurance £2 is. 4d., and interest on initial outlay £2 8s. 10d.; total £17 16s. 8d. As previously stated the amount of average weekly profit immediately prior to the accident would then have to be added to the total standing cost to form the basis for a claim for loss of use.
AMIDDLESEX reader states that he is operating a private hire business, but finds that his present vehicles are too small and is considering the purchase of a coach. Before doing so he asks for advice on the legal implications of such a step and some indication of the likely operating costs of this type of vehicle.
Before detailing the regulations controlling the operation of public service vehicles, it is first necessary to give the legal definition of this type of vehicle. Any motor vehicle used for carrying passengers for hire or reward, which is either carrying passengers at separate fares or, if not so doing, is adapted to carry eight passengers or more, is considered to be a public service vehicle and is so defined in the Road Traffic Act 1960, paragraph 117.
For the purpose of licensing, public service vehicles are divided into three classes, namely stage carriages, express carriages and contract carriages. The first of these—the stage carriage—is a public service vehicle carrying passengers at separate fares, but which does not operate as an express carriage.
An express carriage, however, is a public service vehicle carrying passengers at separate fares none of which is less than Is., or such greater sum as may be prescribed. For the purposes of this sub-section a composite fare for more than one journey, such as a return or season ticket, is regarded as one fare and is not to be divided among the journeys which may be made with it. Moreover, no account is taken of fares charged in the case of passengers of particular descriptions, such as children's, student's, or workmen's tickets, if a fare of Is. or more is charged for a similar service when ordinary passengers are carried.
The third group of public service vehicles—contract carriages —are vehicles which do not carry passengers at separate fares but where there is a contract express or implied for the use of the vehicle as a whole.
Irrespective of the type of operation, a public service vehicle licence must be held for the vehicle, and the driver (and conductor where carried) must hold a licence.
In the case of stage and express carriages, it is necessary, in addition, to hold a road service licence fof the service which is to be operated, but this is not required for contract carriages, which are presumably the type of service which interests this particular reader. The public service vehicle licence is issued by the Traffic Commissioner for the traffic area in or from which the vehicle is ordinarily used. Such licences authorize the use of the vehicle as a stage, express or contract carriage as the case may be, and are personal to the holder of the licence. It is permissible for a vehicle licensed as a stage carriage to also be used as an express or contract carriage. Similarly, a vehicle licensed as an express carriage could be used additionally as a contract carriage. A public service vehicle licence cannot be granted unless there is a certificate of fitness in force in respect of the vehicle, although this dOes not apPly in vehicles adapted to carry less than eight passenger. These certificates are issued by a certifying officer of the Ministry of Transport after he has been satisfied that the particular vehicle complies with the prescribed conditions as to its fitness.
For a public service vehicle licence the fee is £6 and the licence is valid for one year. The fee for a certificate of fitness is £5 10s. and the certificate may be valid for a period from one to seven years as decided by the certifying officer. In determining whether a passenger vehicle is being used for hire or reward, it should be noted that any payment or consideration given by . or on behalf of a passenger is considered to constitute for hire or reward."_ Similarly, any payment which is made to a club or society which thereby entitles the passenger to be carried on one of its own vehicles also constitutes hire or reward, even though the payment is not directly related to any journeys made. .
The expression " separate fares" also has special implications in this context. This expression here covers not only
what is generally understood as separate fares, namely separate payments made by individual passengers direct to the operator, but also other arrangements. These would include occasions when separate payments for the journey are made, whether or not to the owner of the vehicle or. to some other. person, Moreover, it is immaterial whether the payments are made solely in respect of the journey or not. A payment is considered to be made if it gives the passenger the right to be carried for one or more journeys and even whether or not he actually travels. Many small operators at present engaged in private hire work with cars and contemplating using vehicles adapted to carry up to seven passengers, may be concerned with the special circumstances when such vehicles may not be treated as public service vehicles, although carrying passengers at separate fares. Such circumstances could arise when any one of the following four alternative requirements is satisfied.
The first of these will be when the vehicle is used on the occasion of a race meeting, public gathering or special
occasion. Alternatively, when it is being used on a journey in which all five of the
following conditions are satisfied. The number.of the passengers must not exceed four and the agreement for the payment of separate fares must not be initiated by the driver or owner of the vehicle, by the person who has let the vehicle out on any hiring agreement, or by any person who receives any remuneration for arranging the journey.
A. DDITIONALLY, there Must be no previous advertisement to the public of facilities for passengers to he carried at separate fares, nor must the journey be one on which passengers are frequently carried in the same or other vehicles belonging to the same owner.
Neither must the journey be made in conjunction with a service provided under a road service licence in eases where the vehicle is owned by either the holder of the licence or a person receiving remuneration from the operation of the service.
The third requirement, whereby passengers could be carried at separate fares without tke vehicle being considered to be a public service vehicle, is that each of the passengers making the journey must be outside Great Britain at the time of concluding the arrangements for it. Alternatively when the arrangements for bringing together all the passengers had not been made by either the driver or owner of the vehicle or anyone who receives remuneration in respect of the arrangements. An exception is made as regards the condition prohibiting advertisements. -Journeys may be advertised by a. notice displayed, or alternatively an announcement made, in the usual 'fashion in a place of worship. Alternatively an appropriate notice could be inserted in a parish magazine or similar periodical published for the information of persons attending a place of Worship, With a correspondingly limited circulation.
As an example of likely operating costs for small vehicles engaged on private hire work, the following details are given relative to 14, or • 31-seater coaches, fitted with petrol engines.
rrl HE Cost of licences. in respect of the 14-seater will he 1. reckoned as equivalent to /s. 4d. a week. Ineidentallys as with all five of the standing ,costs, this arnount_isslerived on the basis of. a. 50-week year to; allow for two Weeks .a year when the vehicle is off the road for civet-bent Or driver's holidays. Unlike other forms of transport there is no .statutory rate of pay applicable to Coach drivers and the weekly cost to the employer will be arbitrarily, assessed at £10 -ISs. 9d. This amount includes additions for. crintributions to National and employers' voluntary liability 'insurance and 'adjuitment. to
allow for two weeks holiday with-Pay. • •
Rent and rates in respect of garaging the vehicle are estimated to be the equivalent of 12s: 10d. a Week whilst . vehicle insurance is reckoned to add £1 Os:10d. a week. -Allowing a further 18s. 10d, a week for interest charges, the total -standing cost per -week would then be £13-8s.• 7d.
Assuming the vehieie averaged 400 miles a .week, running costs per mile are estimated as follows:— Fuel 2.56d., lubricants 0.18d., tyres:0.40d., maintenance 1.78d., and depreciation 2.33d.: total 7.25d. The total operating cost would then be 15.31d. per mile or £25 10s. a week.
The corresponding cost for the 31-seater, calculated in a similar manner would be:—Standing costs per week—licences 9s. 9d., wages £10 8s. 9d., rent and rates 14s. 4d., insurance £1 9s,, interest £1 18s. 8d.; total 115 Os, 6d. Running .coSts per mile— fuel 4.60d.. lubricants 0.22d.. tyres I.02d.. maintenance 2.64d., depreciation 3.53d.; total 12.01d. Still assuming a weekly average of 400 miles, the total operating cost would then
be 21.03d. per mile, or £35 Is. per week. S.B.