Cedric Stephens | When little things pile up, insurance image takes a hit
QUESTION: I was in a car accident on April 15. A man driving a rental car broke a stop sign and crashed into mine on April 15. He admitted that he didn't "see" it as he was coming out of Stanton Terrace. I was going up Mountain View Avenue. The other vehicle is owned by a Montego Bay car-rental company. I received a release from the rental company's insurer last week. They offered to settle my claim for $1 million. The cost of repairing my vehicle is $1.5 million. This excludes loss-of-use expenses, towing charges, plus assessors' fees. The third party's insurers say that
$1 million is the maximum they are required to pay. Am I obliged to accept their offer? Can I sue them for the balance? The driver of the rental vehicle lives in New York. Is there any point trying to recover directly from him?
- JFC, Kingston 8
INSURANCE HELPLINE: The thesis of Malcolm Gladwell's critically-acclaimed novel, The Tipping Point, is "little things can make a big difference". I recommend the book to Police Commissioner George Quallo as well as to his critics who want a quick fix to the problem of homicides.
Part of Gladwell's novel deals with the rise and fall of crime in New York City. It also discusses other topics. I would also suggest to insurance company CEOs, the insurance regulator, and claims managers that they read it as well.
'Little things' can have a big impact on how persons feel about insurance and insurance companies. Managing claims effectively and meeting the expectations of policyholders and claimants involves getting many 'little things' right. The way in which your claim was handled by both insurers provides several examples of many 'little things' gone wrong.
European Union officials in Brussels are not happy about the way in which the business of insurance is conducted. They wrote a document called the Insurance Distribution Directive. One of its aims is to "strengthen policyholder protection".
Two specific provisions relate to: a) the completion of at least 15 hours of professional training per year by employees; and b) the delivery of information to customers. Similar rules do not appear in our regulations. You are absolutely right to question the accuracy of the information that you received in relation to your claim.
The Motor Vehicles Insurance (Third Party-Risks) Act says in Section 5(3)(b) that "in respect of property damage claims, the policy must be required to cover a total liability of not less than one million dollars ... arising from all claims ... in connection with one accident""
The limit is the minimum that the law requires. The legislation is very specific. It does not give the impression that the owner or driver is legally off the hook when the liability in any one accident exceeds the stated limit.
This means, in relation to the third party insurer's offer of settlement to you, that you still have the right to sue the car owner/driver for the amount that the insurance company did not pay. Unfortunately, you will have to do so on your own because your policy does not provide protection for this. By paying you $1 million, the third-party insurer is discharging its contractual duty to its customer, the car-rental company. You would, therefore, be wasting your time and money in trying to bring an action against their insurer.
Accept the $1 million offer of settlement. Exercise caution when signing the form of release they sent to you. Make absolutely sure that by signing it, that you are not giving up your legal right to sue the car-rental company for the amount that their insurance company did not pay you. It appears likely that you will recover the portion of your claim in excess of $1 million if you were to sue the car-rental company. They are here, and, presumably, they have assets. They seem to be stupid or appear to have a high tolerance for risk. They underestimated the amount of damage that their vehicle could cause or were ignorant about the prices of motor vehicles on our roads.
To improve your chances, I suggest that you retain the services of an independent claims specialist or attorney to lead the recovery efforts.
I am a strong believer that "little things can make a big difference", therefore, I recommend the US Securities and Exchange Commission's 83-page Plain English Handbook to insurance companies. Even though it was written for a domestic audience in the securities industry, it contains insights and information that can be applied in local insurance industry. If, for example, it was used in policyholder-claimant communication, you would have had a better understanding of how to resolve the problem you now face.
Today's article is my small, unsolicited contribution to the local insurance industry and to what Finance Minister Audley Shaw calls the Government's national financial inclusion strategy.
- 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