Avoiding Car Insurance Claims, From Being Declined | Insurance

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.

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.

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 an accident happens under different circumstances, for example where an employee's car 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 vehicle was in a roadworthy condition. Incorrect tyre pressure is one of the most common causes of newer cars 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.

Tyres do need to be checked for wear; probably the most practical option is to make the employee responsible. It is after all his car and his life that is at risk if he drives the vehicle in an un- roadworthy condition. The period between servicing intervals nowadays can be very long indeed. Previously, when a typical servicing interval was 12,000 miles, companies used to rely on the dealership's servicing department telling them if a tyre needed changing. That is no longer a practical option; indeed some would question whether it is ever a practical option, to rely on a servicing department, because they do appear to have a habit of changing tyres before they need to be changed.

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.

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 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 car jacking. They justified this because the vehicle did not have tracker fitted, in spite of the fact that they had 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.

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 is a major factor when motor insurance companies refusing to pay claims. There was a reported case in the United States, 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 fix himself a drink. Understanding that cruise control meant the vehicle 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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