Advisory Column: Unreported accidents are unjust. Lawmakers should help
QUESTION: I have noticed over time that there have been complaints by individuals (myself included) who have been involved in accident which third parties fail to report to their insurers. At best, this severely delays the settlement process. At worst, it prevents innocent victims from getting compensation. Isn't an insured party obliged to report accidents to his insurers within 30 days? Why is this not done in so many cases? Are there sanctions in place for non-compliance? A person who fails to honour that duty should be deemed to have committed a criminal offence. His or her driver's licence should be indefinitely revoked.
INSURANCE HELPLINE: Lawmakers will soon debate a new law to replace the 77-year old Road Traffic Act and, at the same time, consider a new regime of fines for persons who break that law. According to a recent issue of this newspaper, "fines in some instances will jump by more than 1,000 per cent".
Motorists with whom I spoke about the impending changes, which include, for example, the imposition of a $10,000 fine for using a cellphone while driving, were completely unaware of these matters which are to be debated in Parliament before they become part of the laws of the land.
Of the 45 offences listed in the article - for which a fixed penalty may be paid to a collector of taxes (also know as ticketable offences) - only one deals with "driving a motor vehicle without evidence of insurance or failing to surrender evidence of insurance".
Some motorists comply with the letter of the Road Traffic law by insuring their vehicles. These same motorists effectively ignore its spirit by failing to report accidents to their insurers. They also disobey their contractual duty to report accidents under their policies of insurance.
Fifteen years ago, I called these persons criminals in an article that I wrote. These persons, I suspect, reason that they avoid paying higher insurance premiums by not filing reports with their insurers when they have accidents.
Based on reports from scores of persons who have had encounters with these dishonest motorists, this is how I described, 15 years ago, what typically happens in cases like those you cited: "Your car is damaged in a collision. The other person is at fault. In most cases, he does not contest liability. He exchanges particulars with you at the scene. He provides valid evidence of insurance. Everything seems above board. He undertakes to file a report with the police and his insurers. The first promise is honoured. You get an estimate to repair your vehicle. The cost, at $25,000, is below your excess. You decide to get his insurers to fund the repairs.
"Four weeks later, the third party's insurers say he has not reported the accident. They take particulars from you and write to him. Six weeks pass. You phone the insurers. They tell you they are still awaiting a response. You begin to get an uneasy feeling in your stomach. You ignore it because the vehicle is deteriorating. You decide to borrow money to repair it.
"Two weeks later, you contact the insurers again. The position has not changed. Their client has still not reported the accident. They tell you they cannot pay your claim. They are not being unreasonable; they have written two letters and phoned several times. The insured seems to have vanished. Nothing can be done until they receive a report from their insured about the mishap, they say.
"Twelve weeks have now passed. It finally begins to dawn on you that the third party has 'forgotten' to report the accident, that he lied to you and had no intention whatsoever of making a report. In the meantime, you are down the hole for $25,000. The prospect for recovering it seems very remote."
Lawmakers passed an amendment to The Motor Vehicles Insurance (Third-Party Risks) Act over 25 years ago. Those changes were meant to prevent the insurers of those persons from refusing to pay claims because of intentional memory lapses on the part of some motorists. Unfortunately, innocent victims of accidents, motorists and staff of insurance companies, agents and brokers, perpetrators of the scam and even some attorneys, appear to be ignorant of that amendment.
Should the failure to report an accident to one's insurer, plus the revocation of driver's licences solve the problem? I strongly doubt so based on our experience since 1989. The same problem occurs in other countries. The Malaysian insurance regulatory authority, Bank Negara, introduced measures in 1998 to aid the victims of those who suffered from this type of "memory lapse". They got motor insurers there to sign an agreement to the effect that they will honour property damage claims where policyholders have forgotten to report them.
Is there one lawmaker in Jamaica who is willing to take up this particular challenge and find a simple, creative solution?
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: email@example.com