Avoid Company Vehicle 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’s 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 think about 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’ve 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.
Although it is not widely known, most contract hire companies have a form of fall back insurance for their contract hire vehicles; this can covers them if the hirer has an accident and their insurer refuses to pay out. Of course the contract hire company will then hold the hirer liable for any loss, but on occasions the hirer is a limited company that subsequently goes into liquidation. If there are no personal guarantees in place then the contract hire company has no means of recovering its money other than to claim on their own insurance. Nowadays contract hire companies are seeing an increasing number of cases where claims are being repudiated. The more serious the accident, the more closely the insurance company will investigate a claim. After all they have to look after their shareholders interests, paying claims where the insurer or driver haven’t complied with the terms and conditions of the insurance, isn’t looking after the shareholders interests.
Most insurance company’s terms and conditions state that the automobile must comply with the manufacturer’s specifications, so the vehicle must not be altered 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 vehicle. It is not unheard of for employees to have the engine of their company automobile “chipped” this is a process that changes the way the engine control unit manages the engine and increases the brake horsepower of the car. This would give an insurance company a very good reason to refuse to pay out on a claim, if the car 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’s 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 purchases and keeps it’s cars for longer than the typical contract hire term, maybe four or five years, then ensuring they’re, in what an insurance company would consider is a roadworthy condition, can be more difficult. The risk of a automobile 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 car to be in an un roadworthy condition. Incorrect tyre pressure can affect road holding, steering, braking and the overall handling of a automobile 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 uncommon for the insurance company to check that the vehicle 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 automobile, this wouldn’t be a factor.
If an accident happens under different circumstances, for example where an employee’s automobile 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 car was in a roadworthy condition. Incorrect tyre pressure is one of the most common causes of newer automobiles 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.
Company automobiles 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 each 12,000 miles, now manufacturers have extended the intervals and it can even be 20,000 miles. Clearly with intervals this long the company can’t rely on the serving department advising them when tyres have insufficient or uneven wear. Driving the car with the wrong tyre pressure can cause uneven wear.
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 granted 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 automobile 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 automobile, 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 granted for the danger 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 vehicle drivers do this in the winter, so that the heating works as soon as they get into the automobile. Many have found themselves having to explain to their employer, that the vehicle was gone when they came out of their house.
If the company automobiles are to be insured whilst on the road, the driver must have a valid driving licence. There are lots of 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 contract hire broker is being used to source the company automobiles, most established contract hire brokers offer a licence checking service, if not there are other companies that specialise in providing a licence checking service. Regularly checking an employee’s driving licence is the only way a company can be sure that this type situation does not arise. An employee could be disqualified, or have accrued other convictions after the company has taken a copy of the licence. It is important to have these checks carried out not only to ensure the company’s insurance isn’t invalidated but also to protect the company in view of the new legislation.
If an insurer rejects a claim, it does not necessarily follow that they have acted correctly. There have been many such decisions by insurance companies, which have subsequently been overturned by the Financial Ombudsman, the body that deals with disputes or complaints against insurance companies. In a case that involved one of our clients, the insurance company refused to settle a claim in excess of 60,000 following a vehicle jacking. They justified this because the car did not have tracker fitted, in spite of the fact that they’d told the client on many occasions that it was a requirement. The client, who disagreed with the insurer’s decision, called in an expert. The expert said that whilst the insurer had told the client he must have Tracker fitted, they had not written to the client and told him they were no longer providing cover. The expert’s views were made known to the company and the claim was settled in full, soon after.
In summary it can help to avoid claims being declined by observing the following: Ensure that the car 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 automobile, 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 big US companies test for drugs, even though there are concerns regarding false positives; Cars 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 is a major factor when motor insurance companies refusing to pay claims. There was a reported case in the United Says, apparently perfectly true, where the purchaser of a new motor home set out on a journey and after setting the vehicle to cruise control, went to the back of the vehicle to repair himself a drink. Understanding that cruise control meant the car would drive itself. Not surprisingly it crashed. Of course being America he was able to sue the manufacturer for not telling him that, cruise control doesn’t work like that.
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