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Avoiding Car Insurance Claims, From Being Declined

by: HarveyWilliams
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There was a time many years ago when a company could be paid out on an insurance claim for no reason, other than for being a good and loyal client to the insurance company. Whilst it is possible that even today an insurance company could make a commercial decision when considering a claim from a very large client, many companies are at risk of having claims repudiated.

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.

Many companies with company cars are not aware that the motor insurer's terms and condition state that a vehicle must not be modified in any way, without advising them of the changes. It is for this reason safer to fit the manufacturer's recommended tyres, with the correct speed rating. It is important that employees understand that they must not change or modify their company vehicle in any way, in order not to run the risk of invalidating the insurance. Some employers have discovered, following an accident, that an employee has done what is know as "chip" the company vehicle's engine. This has the effect of increasing the car's horsepower. The insurer will often, with justification, refuse to pay out a claim, because the car is more powerful than the vehicle they understood they were insuring. It also causes another problem in that it can invalidate the car's warranty. In this eventuality it could cause the contract hire or leasing company to make a claim against the hirer; if the vehicle were for example on two years contract hire, then the hirer would be returning the vehicle without its third year 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.

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 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.

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 this.

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.

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.

It is important to ensure that all your drivers have a current driving license and that previous convictions like drink driving, if required by the insurer, have been declared. Some employers have never seen more that a photocopy of their employees' driving licence, others take a photocopy of the original and hold it on file. This is very unsatisfactory from the company's point of view. There have been cases of it emerging after an accident that the employee was driving whilst 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.

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 case.

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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.

Avoiding Car Insurance Claims, From Being Declined

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