Avoid Company Car Insurance Claims Being Repudiated
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.
Contract hire companies nowadays see many cases where insurers have refused to pay out on claims following accidents. Naturally the larger a claim
the more closely an insurance company will scrutinise it; if one of your company vehicles has a minor accident it does not make financial sense for the
insurer to spend too much time on the claim. If however it is a major accident there are very sound commercial reasons why the insurance company
will closely examine all aspects of the claim and the circumstances surrounding it. An Insurance company's obligation is to its shareholders, which
doesn't include paying out on claims, if they can find good reason to invalidate it.
A motor insurance company's terms and conditions will normally state that a vehicle should comply with the manufacturer's specifications; if the
vehicle is modified by the driver it is essential to inform the insurance company, otherwise it can invalidate the insurance. For this reason it is always
advisable to fit the manufacturer's recommended tyres. It is important to advise employees that they must not make any changes to their company
vehicle. It has been known for employees to do what is called "chip" the engine of their company vehicle. This increases the power of the engine and
could, if they had not been notified, give an insurer a very valid reason for refusing pay out on a claim. It is worth bearing in mind that this can also
invalidate the manufacturer's warranty and potentially cause a problem with the contract hire company; a vehicle without a manufacturers warranty
does not have the same value as one that does.
Also the company car must be kept in a roadworthy condition. If a company vehicle is on contract hire, then there is usually not much to worry about; it
will on average be less than two years old and regularly serviced and maintained. In a case where a company buys and keeps it's vehicles for longer
than the typical contract hire term, maybe four or five years, then ensuring they are, in what an insurance company would consider is a roadworthy
condition, can be more difficult. The risk of a vehicle developing a fault that could make it un-roadworthy generally increases, the higher the 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 the circumstances of the accident were different, if say your employee's vehicle skidded and crashed into another vehicle or failed to negotiate a
bend and crashed, then it is quite possible that the insurer will carry out various checks on the vehicle, to ensure that it was roadworthy. Driving with
the incorrect tyre pressure can be very dangerous; it can affect braking, steering, road holding and the general stability of the car. Employee's need to
be advised that they must check their tyre pressure on a regular basis, tyres are best checked when they are cold. The incorrect tyre pressure apart
from the increased risk of having an accident will also significantly increase your overall 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
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.
The position is essentially the same if the employee is driving the company vehicle, whilst under the effects of drugs. Even if an employee is taking a
prescription drug rather than recreational drugs, this could affect their ability to drive in a safe manner. Following new legislation, effective from April
2008, it is the company's responsibility to ensure that their employees are safe and this includes, whilst driving on company business
Negligence is another area where an insurance company will often refuse to pay out. This is quite understandable because when an insurance
company agrees to take on a risk, they will not have allowed for the risk of an opportunistic thief taking advantage of a driver's negligence; where they
leave their keys in the car whilst they pay for their petrol, or if they leave it parked on the road, or on their drive with the engine running. In spite of the
risks, many company car drivers do this in the winter, so that the heating works as soon as they get into the car. Many have found themselves having
to explain to their employer, that the car was gone when they came out of their house.
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.
The following may help to prevent a claim from being declined by an insurer; company cars should be maintained regularly and tyre pressures need to
be measured frequently to ensure pressures are correct and wear is even. It should be made clear to employees that they must not modify their car in
any way and that they should not ignore any warning lights that show up. It can help to reduce drink driving amongst employees if they understand that
they are likely to loose their job as well as their driving licence, if caught. They should also be advised of the risks of driving if taking any form of drugs,
including some prescription drugs. Make employees aware that if they leave the car with the engine running there is a very real risk of it being stolen.
Also using a contract hire and leasing broker to check employees driving licences, will avoid the risk of employees driving with undeclared convictions,
or whilst disqualified.
Very often when motor insurance claims are declined, the insurer claims that the driver has been negligent. Some employers, perhaps with
justification, worry that company car drivers are more prone to be negligent with the company car than they would perhaps with their own vehicle. It
seems that negligence is a factor in accident claims not being paid, throughout the world; following an accident in America the insurer refused to pay a
claim for accident that happened when the owner of a new motorhome thought the vehicle would drive itself after he had switched to cruise control.
This did not stop him taking legal action against the manufacturer of the motorhome claiming that they should have told him that cruise control didn't
encompass steering, braking and knowing where to go etc. Common sense does not appear to be a factor in the American legal system; he won his
About the Author
For more information about contract hire, lease purchase, finance lease or vehicle hire purchase in the UK please contact Bowater Price plc
http://www.bowaterprice.com Tel - 01494 536 536.