Cedrid Stephens | Start reading those insurance contracts
I was involved in an accident at the start of 2017. My vehicle sustained substantial damage. I reported the incident to my insurers. Two months after submitting the claim, I received a cheque representing the settlement amount minus my excess and GCT. I was told that the excess would be settled once the third party's insurer honoured the claim. After trying to get an update from my insurer, I learnt that due to a breach of the third party's policy, there would be no settlement. I am a law-abiding citizen who paid money to buy insurance to drive on the road. Can an insurance company decide not to pay a claim because of the actions of its policyholder? Is there anything that I can do to recover the excess?
- T.B., Kingston.
Call me weird! The first thing I did after reading your email was to conduct a Google search. What were the opinions of others about the benefits of reading?
I got the distinct impression that even though you had spent thousands of dollars to buy motor insurance, like many millennials, you had not bothered to read the contract that governs your relationship with the insurance company. This was a big mistake. Do so immediately.
And while you are at it, visit the Ministry of Justice's website. Download the Motor Vehicles Insurance (Third-Party Risks) Act, MVITPRA, and read it.
The Certificate of Insurance and the Thursday Gleaner's lead story, 'Crisis in the Courts' are vital for you to gain a big-picture understanding of the issues.
Your insurer honoured its duties under the contract.
The agreement says something like this: "We will pay if your vehicle is lost, stolen or damaged as a result of: a) Accidental collision or overturning; b) Fire, external explosion or lightning; c) Theft or burglary; d) A malicious act; e) An accident while it is being transported; f) Flood, hurricane, volcanic eruption, earthquake, or other convulsion of nature."
Settlement of your claim would be based on the cost of repair or replacement of the vehicle.
EXCESS OR DEDUCTIBLE CLAUSE
The excess or deductible clause would typically say:
If your vehicle is lost, stolen or damaged, you will have to be responsible for: i) In respect of accidental collision or overturning, a malicious act or an accident whilst being transported, an amount equal to the percentage of the sum insured, and subject to minimum and maximum amounts, stated in the schedule; ii) In respect of burglary, theft or attempted theft an amount equal to the percentage of the sum insured stated in the schedule, not subject to any maximum limit that may be stated in the schedule. This excess will not apply if the loss or damage is caused by fire, lightning or explosion.
Contracts of motor insurance in Jamaica must comply with the MVITPRA. Section 8 (2) of the law lists eight specific situations where an insurer may not avoid liability or refuse to pay a claim. This part of the law is, among other things, recognising an insurer's right not to pay a particular claim where it falls outside the eight specific situations. If, for example, the person who was driving the third party's vehicle did not have the appropriate type of licence to operate it, the insurer could legitimately refuse to pay the claim.
You can, in theory, exercise your legal right to sue the driver of the third-party vehicle in an attempt to recover the excess or deductible.
With the shambolic state of the court system that Director of Public Prosecution Paula Llewelyn and her deputy described to members of parliament, I would not guarantee a quick positive outcome if you decided to go this route. At this stage, it would be realistic to assume that given the passage of time, it is most unlikely that you will never recover your deductible from the third party.
- 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