Helping To Avoid Insurance Claims Being Repudiated

by: HarveyWilliams
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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.

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.

It is not only lack of maintenance that can cause a vehicle to be un roadworthy, it can often be a failing on the part of the driver; incorrect tyre pressure is the most common reason. Driving with the tyres incorrectly inflated can be very dangerous, particularly if the roads are wet. If one of the company vehicles is in an accident and the accident is of a serious nature, then the insurance company will normally check the vehicle's roadworthiness. Of course if another motorist were clearly at fault then the insurer would have no reason to check the condition of the vehicle.

If it is the case that the employee's actions have clearly caused an accident, perhaps where they have lost control on a corner or failed to brake in time, then it is quite possible that the insurance company may want to inspect the vehicle, to satisfy itself that the car is in a roadworthy condition. It is not uncommon to find that company car drivers have incorrectly inflated tyres, or just neglected to check them. It is important that employees are made aware of this danger, recommending them to check their tyre pressure, when the tyres are cold, at least every two weeks. This will also help reduce the company's overall fuel consumption.

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.

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.

Employees should also be told that they must not, however cold the weather is, go out and start the car and leave the engine running to warm the car up. However comfortable this may make the drive into work, it is highly risky; if someone got into the car and drove off, as has happened many times, the insurance company will not pay out for a vehicle stolen under these circumstances. The same applies if an employee leaves the keys in the car at a petrol station whilst they go to the cash desk.

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 uses a contract hire broker to source their vehicles they could arrange for the broker to regularly check the employee's driving licences; a licence checking service is offered by the more established contract hire and leasing brokers. This is the only way that a company can be sure an employee not been convicted of offences that they are unaware of and cause their insurance to be invalidated. This will also help them to avoid being prosecuted under new legislation introduced in April 2008.

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.

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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.  

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