Avoiding Car Insurance Claims, From Being Declined
Some time ago it was feasible to for an insurance company to pay a motor claim that would have otherwise been declined, simply because the claimant had been a long term and loyal client to the company. Even today it is not inconceivable that an insurance company will make a decision to pay a claim on commercial grounds, for example where the claimant is a very major and highly profitable client. However the days of paying out a claim in order to treat a long-term client decently, are long gone and many clients risk having claims declined.
When a vehicle is on contract hire, the contract hire company owns the vehicle but the hirer insures it. Therefore when an insurance company refuses to pay a claim, the hirer becomes responsible and contract hire companies are seeing this happen more frequently. In the case of minor accidents, insurance companies rarely look too closely at the circumstances. However in the event of a serious accident, it makes very sound financial sense for the insurance company to examine the circumstances of the accident and take a close look at the driver. An insurance company is answerable to its shareholders and its shareholders would not appreciate it paying out claims when it has good grounds for refusing to do so.
Most insurance company’s terms and conditions state that the vehicle must comply with the manufacturer’s specifications, so the vehicle must not be modified in any way without informing the insurance company. That is why it is advisable to always fit the manufacturers recommended tyres. Employees should be told that under no circumstance should there be any modification made to the engine of their company car. It is not unheard of for employees to have the engine of their company vehicle “chipped” this is a process that changes the way the engine control unit manages the engine and increases the brake horsepower of the vehicle. This would give an insurance company a very good reason to refuse to pay out on a claim, if the vehicle is involved in an accident. In any event it will invalidate the vehicle’s warranty.
The vehicle must also be roadworthy to comply with the insurance company’s terms and conditions. Contract hire vehicles, as most company car are nowadays, are generally relatively new and regularly serviced. If however a company runs its own vehicles and keeps them for perhaps four or five years, then the condition of the cars needs to be monitored more closely, particularly if they are doing high mileage.
Of course it is not only the lack of maintenance that can cause a vehicle un roadworthy; depending on the circumstances of an accident, having the wrong tyre pressure, where the tyres are unevenly, over or under inflated could cause the insurance company to deem the vehicle to be in an un roadworthy condition. Incorrect tyre pressure can affect road holding, steering, braking and the overall handling of a vehicle and in an accident can often be a contributory factor, particularly in wet conditions. If a vehicle is involved in an accident, it is not unusual for the insurance company to check that the car is roadworthy; it is in their interests to do so. Of course if the circumstances of the accident were such that it is clear that the accident has been caused by another vehicle, this would not be a factor.
If an accident happens under different circumstances, for example where an employee’s car crashes on a bend or skids out of control and causes the accident, then it is quite reasonable that the insurance company will want to ensure that the vehicle was in a roadworthy condition. Incorrect tyre pressure is one of the most common causes of newer cars being un- roadworthy. Employers should advise their employees that tyre pressures need to be checked regularly. This is best done in the morning whilst the tyres are still cold. Another good reason for ensuring that tyre pressures are correct is that it can significantly reduce the company’s fuel bill.
It is also important that tyre wear is regularly monitored to ensure that tyres do not go below the legal limit; with servicing intervals at 18,000 miles and more, one cannot rely on being advised during servicing, that it is necessary to consider changing tyres. Having tyres that are below the legal limit is not maintaining a car in a roadworthy condition. Sometimes only part of the tyre is worn; running the car with the incorrect tyre pressure can cause this.
A risk to the company’s insurance cover that is often overlooked by companies is when employees drive their company cars whilst having exceeded the legal limit of alcohol consumption. The risk is higher outside of office hours, when employees stop for a drink on their way home, or at weekends. Whilst it may be outside office hours, it is still the company’s vehicle and insurance. It was revealed in a study in 1998 that in 10% of motorcycle accidents where there was a fatality and 19% of fatal car accidents, alcohol was involved. It seems extraordinary that even today with all the increased publicity, there are drivers who believe their driving skills are enhanced following alcohol consumption.
The same will apply if the employee is under the influence of drugs. The company should also take into account that an employee may be taking a prescription drug that could affect their ability to drive safely. It would perhaps not be unreasonable for a company to check with an employee if they feel this could be the case. With the new legislation that comes into force in April 2008, the company is responsible for ensuring that its employees are safe when driving on company business.
Another risk is when the insurance company believe that a loss has been caused by negligence on the part of the driver. An example of this would be where an employee has left his car, either on the drive or in the road, with the engine running; many do this in the winter so that when they get into the car, it is already heated up. If an employee does this, or leaves the keys in the car when at the petrol station and an opportunistic thief jumps in and drives off, the insurance company is unlikely to pay out.
There are employers that have never checked their employee’s driving licences, relying instead on a copy provided by the member of staff. Some photocopy the original and feel that this is satisfactory. Not considering the possibility that whilst in their employment the employee could be convicted for drunk driving and continue driving whilst disqualified. In the event of an accident it is inconceivable that the insurance company would be prepared to meet the claim. New legislation introduced in April 2008, makes the employers responsibility for the safety of their employees and others, including whilst the employee is driving on company business; if there were a death the employers could find themselves prosecuted.
If a company’s vehicles are sourced through a broker, the larger and well established contract hire brokers are able to offer a service where they regularly check the employee’s driving licences. They can be checked when they are first employed and then at regular intervals, to make sure there are no new convictions. Once employees are aware this system is in place they are much more likely to come forward and declare a new conviction. Apart from protecting the company as far as it’s insurance is concerned; it also affords it protection from prosecution under the new legislation.
If an insurer rejects a claim and the insured feels that the insurance company is unjustified, the case can be taken to The Financial Ombudsman. There have been many claims that insurance companies have refused to pay that the Financial Ombudsman has ruled should be paid, unfortunately many claimants just accept the insurance company’s decision. A client of ours had his car stolen in a carjacking incident, the insurers refused to settle the claim for the Mercedes Benz, valued at more that 60,000. They told the client that they had repeatedly written to him advising him that he must fit tracker to the car, which he had failed to do. However when it was pointed out to the insurance company, following legal advise, that they had not told the client that he would no longer covered in the event of theft, the insurance company settled the claim in full.
To summarise, it is important to ensure that vehicles are properly maintained and that tyres are regularly checked for wear and the pressures should be checked ideally every two weeks. Employees should be prohibited from making any modification to their company vehicle and should heed any warning lights that come up on the screen of their vehicle. They should also be warned about driving whilst under the influence of alcohol or drugs and encouraged to speak to the company if they are on any type of medication that may affect their ability to drive safely. Vehicles should not be started and left to warm up on a cold day and keys should not be left in the car whilst in a petrol station or whilst quickly popping into the shops. Opportunistic thieves only take seconds to steal a car. Speak to a contract hire broker, about licence checking, it is vital that all companies have these checks carried out. The aforementioned will at least go some way, to avoiding a situation where an insurer refuses to pay out on a claim.
Negligence on the part of the driver can often be the cause of an insurer declining a claim. The was a case reported in America where a gentleman having purchased a motor home, set off on a trip and once on the open road, engaged cruise control and left the controls to make a drink. His understanding of cruise control was that the vehicle drove on its own. Of course the insurance company declined to pay for the subsequent damage, after the vehicle crashed, however he was able to successfully sue the motor home manufacturer, claiming that they should have told him that cruise control doesn’t drive the vehicle for you.
