QUESTION: A car slammed into my mother's parked car. The cost of repairing it was more than $200,000. Her insurance company accepted liability. They said that she would have to pay them $45,000 before they would approve the repairs. She lost some of her no claim bonus and her premium has gone up. I have been told that this is standard practice. Was I misled? Why does she have to pay for an accident which was clearly not her fault?
albangedup@hotmail.com.
ANSWER: I am sorry to learn about the mishap with your mother's car. Your case is not unlike the one I wrote about last week. It involved someone from Manchester. A car ran into his minibus. As a result, the minibus was "written-off." Its owner has lost his only source of income. There was no insurance on the other vehicle and the minibus had only Third Party Insurance. In the case of your mother, her losses could exceed $75,000. This assumes that she was unlucky and the other car was not insured. A worse case scenario like this is not improbable given the number of uninsured vehicles which operate on our roads.
The good news is that your mother had "comprehensive" insurance. This means that she had collision damage coverage [unlike the minibus operator last week]. Policies like these do not, as a rule, provide 100 per cent coverage. They pay only a part of the claim. This amount ranges between 90 and 95 per cent. The balance is borne by the claimant. This amount, referred to as an excess [or deductible], is usually stated as a percentage of the vehicle's value. In your mother's case, I assume that her veh-icle was insured for $900,000. A deduct-ible of $45,000 [or five per cent] is not uncommon for a vehicle of this value.
Insurers seldom ask claimants to pay the excess before approving the re-pairers' estimate. The adjuster usually approves the estimate without the payment of funds to insurers. She or he simply tells the repairer what excess [or deductible] applies. The repairer collects it from the claimant after the repairs have been completed and before the vehicle is delivered to the owner. The repair bill is sent to the insurers for payment along with a note signed by the claimant confirming that the repairs have been properly done. If the loss adjuster [or an insurance company rep] actually asked your mother to pay the excess to them to approve the estimate I suggest that she reports this to the insurers.
Insurers routinely withhold or reduce no claims discounts after claims are submitted. These actions are in keeping with the terms of the policies. If they were to reduce or withdraw these discounts illegally buyers could sue them. Your mother could, for example, ask the courts to order her insurers to reinstate the discount and roll back the premium increase. I am convinced without looking at your mother's policy that her insurers can justify their actions. They have a legal basis for reducing her no claims discount and increasing her premium. Check the no claims discount clause in your mother's policy if you do not believe me.
If the vehicle that hit your mother's car was properly insured there could be an upside. She could recover her $45,000 deductible. If her insurers got back the $155,000 they paid to fix her car from the TP's insurers, they would reinstate her no claims discount and, possibly, roll back the premium increase. Your mother could also recover any travelling expenses she may have paid while her car was being repaired. I recommend that you meet urgently with your mother's insurers. Try to find about the third party's insurance. When that has been done either you or your mother's insurers can evaluate the prospects of recovering the costs she has incurred as a result of this unfortunate accident.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. If you need free information or counsel to help you solve a problem write to The Financial Editor or contact Mr. Stephens directly at aegis@cwjamaica.com
