Avoiding Car Insurance Claims, From Being Declined
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.
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.
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 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.
Company cars should have their tyres checked on a regular basis to ensure that wear is within the legal limit. In the past servicing was carried out on
average every 12,000 miles, now manufacturers have extended the intervals and it can even be 20,000 miles. Clearly with intervals this long the
company cannot rely on the serving department advising them when tyres have insufficient or uneven wear. Driving the vehicle with the wrong tyre
pressure can cause uneven wear.
Another risk to the company is employees driving whilst under the influence of alcohol or drugs, an insurance company will not generally pay out if
there is an accident under these circumstances. How many of your employees stop of for a "couple" of pints on the way home? In a study carried out
in 1998, alcohol was a factor in 10% of fatal motorcycle accidents and 19% of cars and other vehicles involved in fatal crashes. In spite of greater
awareness nowadays there are still drivers who seriously believe that they drive better after consuming alcohol. The evidence however shows that
alcohol seriously impairs psychomotor skills and affects the brains ability to process information.
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
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.
If the company vehicles are to be insured whilst on the road, the driver must have a valid driving licence. There are many employers that believe that
taking a photocopy of an employee's driving licence is all that is necessary. Some have never seen the original and accept a photocopy provided by
the employee, only to discover following an accident, that the employee had been previously disqualified.
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.
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.
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.
About the Author
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