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A conflict of interest motor accident case

Published:Sunday | July 27, 2014 | 12:00 AM

Cedric E. Stephens, Contributor

I was recently in a motor vehicle accident. My insurer says that it will be settled on a contributory basis. Neither the other party in the crash nor I will accept full responsibility. My mechanic has estimated the cost of repairing my vehicle at $196,000. The loss adjuster reduced that amount and after the excess (deductible) was applied, the company offered settlement in the sum of $105,000. I am not seeking to be greedy, but I also don't want to be 'shafted' by the insurer, or to pass up any rightful opportunity due to my ignorance. Should I simply accept the insurer's offer, or should I try to negotiate a bigger settlement?

- L.A.F., Kingston.

One of the problems that I have with replying to your question is that you left out important details. Yes, I have the name of your insurance company. However, I do not know for sure how the accident occurred or what type of policy you have. When I theorise that you have a comprehensive policy, because you made reference to a deductible, I run into a roadblock. If you have policy that covers accidental and collision damage, why is the claim being settled on a "contributory basis"? The only way that I can avoid that obstacle is to assume that you and the other party bought your policies from the same insurer. If that assumption is correct, perhaps it can lead to a better understanding of your insurer's actions. Proper advice should be built on facts and not on guesses.

Since you gave me the name of your insurers and I have a specimen copy of their policy, I can say exactly what the contract says. Section 2 reads: "If your car is lost, stolen or damaged as a result of accidental collision ... we may ... pay for your vehicle to be repaired ... we will not pay the cost of any repair or replacement that improves your vehicle beyond the condition it was in before the loss or damage occurred." As you can see, there is nothing there about settlement on a contributory basis. Also, it can help explain, probably, why the loss adjuster reduced your mechanic's estimate.

The decision to apportion blame 50/50 between you and the other driver would only come into play if both of you were insured with the same company. Otherwise, it would be most unlikely that your insurer would have made the remarks about contributory settlement that it did. As regular readers know, it is my opinion that insurance companies have to behave in an ethical and transparent way when dealing with collisions in which they insure all of the parties. They have to protect the interests of both policyholders at the same time that they are looking after theirs. This is a typical example of a conflict of interest.

What argument would you use to justify a bigger settlement, assuming that you are satisfied that the offer is fair and reasonable? Frankly, the only thing that I can think of is challenging the contributory basis of settlement. How could this be done? I do not know because you did not submit details about how the mishap occurred. So, we are back to exactly where we started.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance.