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Insurance Helpline | Insurance companies are not a law unto themselves!

Published:Sunday | May 1, 2016 | 5:00 AM

The article that I wrote two weeks ago, 'Lightning knocks out Tacuma, insurer won't pay', has effects well beyond the frustrated claimant who brought the matter to public attention.

Why? This is because even as a so-called Third World country, "electronic systems now form an increasingly important part of our daily lives (in Jamaica) in government, industry, commerce, churches and other institutions".

These systems or electronic circuitry are now standard parts of new motor vehicles, machines, appliances and other devices on which we have become so dependent.

A claimant alleged that the electronic systems in her car were knocked out during a lightning storm at Holywell in the Blue Mountains about six months ago. At least three independent persons can verify that the storm occurred. The vehicle has been off the roads since.

The insurer has denied the claim. Their "forensic investigation has failed to turn up the expected melted wires, burn marks, etc".

The local representative of the manufacturers who undertook an assessment recommended the replacement of the emission control module. Based on that evaluation, an ex gratia settlement of $50,000 was made. Insurers subsequently increased it to $100,000.

Another repairer estimated that it will cost at least $250,000 to fix the vehicle. The claimant rejected both offers. The vehicle is now with the second repairer.

The insurers do not agree that the car's electronic systems were damaged by lightning. That risk is not excluded from the claimant's comprehensive motor policy. The ex gratia offers were presumably made by the insurer in order to display sympathy for the client. Ex gratia literally means an act of kindness based on a sense of moral obligation rather than because of a contractual duty. In street lingo, insurers have offered the claimant a 'bly.'

The arguments of two experts to the effect that the most probable cause of the damage to the car was lightning have been ignored by insurers. One expert is the National Lightning Safety Institute in the United States. The other is a Jamaican with a doctor of philosophy degree in plasma physics from Oxford University and a lecturer in physics, electrical engineering and electronics. The competence of the two experts has not been questioned. Insurers haven't offered any alternative explanations why the vehicle became disabled after the storm or have suggested that the storm did not occur.

Munich Re, a global company that has been in business since the 1880s, is one of the more important gods in the insurance universe. It is among the world's largest and most respected insurance and reinsurance brands.

Many of the local and regional insurance entities do business with Munich Re. According to information published on the reinsurer/insurer's website, it "systematically researches and scientifically evaluates risks" and "recruits many ... experts from scientific and technical disciplines and develops mathematical models for calculating risk".

Last Wednesday, the company's Canadian subsidiary launched a new insurance product. It was developed to cover "undetectable physical damage to microelectronics". This is similar to what the US Lightning Safety Institute says can happen when the electronic circuits of vehicles are subjected to electromagnetic interference caused by lightning.

The Canadian Munich Re official was also reported to have said that: "Microcircuitry, now critical to almost all equipment, is so sensitive that damage, invisible to the human eye, can cause equipment to simply stop working."

That statement, when coupled with the opinions of the two independent experts and the three impartial witnesses who can attest that the storm actually took place, leads to the inescapable conclusion that the insurer should seriously rec onsider its decision to make ex gratia offers and pay the full cost of repairing the claimant's vehicle.

Failing this, and given the increasing importance that electronic systems or microcircuitry is playing in the local economy, the insurer has at the very least a moral duty to provide a coherent set of arguments to explain its point of view in relation to what happened some six months ago and why it refuses to offer indemnity to that customer. Insurance companies, after all are, not a law unto t hemselves.

- Cedric E. Stephens provides independent information and advice about themanagement of risks and insurance. For free information or counsel, write to aegis@flowja.com.