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Helping To Avoid Insurance Claims Being Repudiated

By: Harvey Williams
 

For many years perhaps right up until the Thatcher years of the 1980s attitudes in business and towards insurance companies in particular, were different; clients tended to remain with the same insurance company for years and there was considerably less "shopping around" than there is today. In turn the insurance company's approach to the client was different; if you were a loyal client that had been with the company for years they would on occasions consider paying a claim that they might have otherwise rejected. In today's more commercial world, for an Insurance company to pay a claim, where they believe they have grounds for declining it, the claimant would need to be a very sizeable client, representing a considerable amount of profitability to the company, loyalty is unlikely to play a part in the decision.

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.

It is important to remember that an insurer requires the insured to keep a vehicle in a roadworthy condition. A high proportion of company cars are on contract hire; they are serviced regularly and are generally under warranty. Any faults or potential faults are normally rectified, by the dealership under the manufacturer's warranty, when the vehicle is in for its service. Some companies purchase and keep their company cars for up to 4 or 5 years. Ensuring that the vehicle is always in a roadworthy condition is much more difficult under these circumstances, particularly if the mileage is high.

There are however, apart from lack of maintenance, many things that can cause a car to be un-roadworthy; if one of your company vehicles is in an accident and it is found to have the wrong tyre pressures, with the tyres under, over or unevenly inflated this could be a serious problem. It would of course depend on the circumstances of the accident; if another vehicle drove into the rear of an employee's stationary car, it could hardly be considered a factor and it is very unlikely under these circumstances that the insurer would check the car's roadworthiness; they would have no reason to do so.

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.

Tyres do need to be checked for wear; probably the most practical option is to make the employee responsible. It is after all his car and his life that is at risk if he drives the vehicle in an un- roadworthy condition. The period between servicing intervals nowadays can be very long indeed. Previously, when a typical servicing interval was 12,000 miles, companies used to rely on the dealership's servicing department telling them if a tyre needed changing. That is no longer a practical option; indeed some would question whether it is ever a practical option, to rely on a servicing department, because they do appear to have a habit of changing tyres before they need to be changed.

Many company bosses seem unaware or unconcerned, of the risks posed by of a company car being uninsured due to employees driving whilst in excess of the legal alcohol limit, Insurance companies are able to refuse to pay out on a claim, if the driver is under the influence of alcohol. In spite of all the evidence as to how alcohol affects psychomotor skills, there are a hard core of offenders who believe that this does not apply to them and that their years of drinking and driving has allowed them to master driving whilst drunk. There is some evidence to suggest that this not so much the younger driver but often men in their 50's. 19% of car accidents that result in a death are believed to involve alcohol. Sadly the death is often not the drunk driver but an innocent pedestrian, another motorist or sometimes children. Employers that make it very clear to their employees that they can be instantly dismissed if they drink and drive are not only helping to avoid the company car being involved in an accident without insurance cover but possibly also saving a life.

Companies should also be aware that if an employee drives his company car and has an accident whilst under the influence of drugs, the company could also find itself without insurance. Unfortunately there are also prescription drugs that can affect the ability to drive safely. It is however an employer's responsibility to ensure the safety of its employees; it may be safer for an employee to ask its employees to advise them if they are taking a medicine that may affect their driving ability, after all many drugs companies advise the user not to operate machinery, or drive whilst taking a particular medication.

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 refuses to pay out on a claim, one should not be necessarily assume that they are correct in doing so. There is the Financial Ombudsman that will deal with any complaints or disputes in this respect. In a case we are aware of, one of our clients had his vehicle carjacked, the insurance company refused to pay out the claim of 60,000, because they said that they had written to him on a number of occasions telling him that he must fit Tracker to the vehicle, which he had not done. They argued that had tracker been fitted, the vehicle might have been recovered. However when an expert was called in on behalf of the client, things changed. Our understanding is that the expert stated that whilst the insurer had indeed written to the client with regard to Tracker, they had not at any time told him he would be uninsured without it. The claim was settled.

In summary it can help to avoid claims being declined by observing the following: Ensure that the vehicle is properly and regularly maintained; Tyre pressures should be checked at least every two weeks, preferably when cold; No modifications should be made to a vehicle, without informing the insurance company; Drivers must take action if a warning light is illuminated; Employees should be warned of the dangers of driving whilst in excess of the legal limit for alcohol consumption; Drugs, including prescription drugs, can affect a driver's ability to drive safely. Drug testing is now used by some companies, up to 80% of large US companies test for drugs, although there are concerns regarding false positives; Vehicles should never be left unattended, with the engine running; Use one of the specialist companies or a contract hire broker to regularly check employee's driving licences. Observing these points will at least help to avoid motor insurance claims being repudiated

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.

Article Source: Main Articles

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