Claims Tutorial PDF

TUTORIAL VII CLAIMS General The "acid test" of an insurance company is the way in which it handles its claim settlements - a t least as far as the insured is concerned. An insurer may have earned a good reputation for its prompt delivery of policies, and ren...

TUTORIAL VII CLAIMS General The "acid test" of an insurance company is the way in which it handles its claim settlements - a t least as far as the insured is concerned. An insurer may have earned a good reputation for its prompt delivery of policies, and renewal notices, and for other services, but that reputation can be ruined by one inefficient or apparently inequitable claims service. If payments are withheld or delayed without satisfactory reasons, policyholders will quite rightly lose confidence in the insurer concerned. The handling of claims, then, becomes perhaps the most important aspect of the insurer's advertising. Notification I t is important that the insurer be notified of claims as soon as possible. This includes any event which could give rise to a claim in due course. The obvious reasons for this are that investigations may have to be made to verify the loss, which may be prejudiced by delay, and chances of recovery from any negligent party are also reduced if enquiries are not started promptly. Policy conditions usually require the policyholder, or his personal legal representative, to notify the insurer of a possible claim within some stipulated period (normally 30 days). Particulars and Proof of loss. The duty of providing full particulars and proof of loss rests squarely upon the insured. He must prove to the insurer that a loss has been sustained by an insured peril. Investigations by insurers should be thorough, and totally without prejudice. Although it is the insurer's intention to give a good claims service speed in payments should not be obtained a t the expense of thorough investigation. Payments should not be unduly delayed. The Insurance Act 2001 stipulates that insurers have thirty (30) days after receiving a duly executed discharge to issue payment for that claim. Once liability has been established through thorough investigation and attention to detail, payment should be made forthwith. Nothing can be achieved by delaying settlement once the claim is found to be valid. CLAIMS PROCEDURE The Claim for Notice of Accident) Form A claim is made by way of a prescribed form provided by the insurer and serves the following purposes:- 1. to establish whether on not the insurers are liable to indemnify the policyholder under the terms of the policy. 2. to establish whether or not the policyholder is legally liable to any third Partym 3. establish the extent of the claim i.e. how much will the claim cost? Questions are designed to identify:- > The policyholder > The policy P The vehicle The form will ask questions relating to > The use of the vehicle a t the time of accident > The driver of the vehicle a t the time of accident > The circumstances of the accident An important part of the claim form is the identification of witnesses as the evidence of the independent witnesses is generally more important than the version of the accident given by the insured who is usually biased in his own favour Scrutinv On receipt of the claim form, insurers will check 1. Whether the Policy is in force 2. If the premium has been paid 3. If the vehicle concerned in the accident is insured by the policy 4. The Excess applicable if any 5. Whether the person driving is permitted to, under the policy or by law 6. Any special endorsements applicable 7. Is the purpose for which the vehicle was being used covered by the policy 8. Did the damage occur in circumstances covered by the policy As part of the claim process, insurers will need to carry out Internal and External Investigations. Internal Investigations Some of the internal investigations carried out by insurers include:- > Check if vehicle involved in the accident is insured under the policy Check that policy was in force at the time af the loss b Ensure that the driver is authorised (if policy is named driver policy) P Check for payment of premium > Check that proximate cause of the loss is covered by the policy (e.g. claim for flood damage) > Ensure that all relevant information is included on the form (e.g. identity of third party / witnesses) External Investirrations lnvestierators Some companies have their own 'Outside' staff to carry out: further investigations; others use Independent firms, perhaps even Loss Adjusters, to do this work on their behalf. Further information is sought on the circumstances and location of the accident, such as:- > sketch plan of scene of accident. P which vehicle had right of way. P visibility. b road surface. > statement from independent witnesses/hospital staff. > statement from Third Party himself, unless he was represented by a lawyer. POLICE REPORTS:- Where the police have been called to an accident, the Police Report should provide most of the supplementary information needed to handle the claim.  MEDICAL REPORTS:- The largest claims are those involving THIRD PARTY PERSONAL INJURIES - These are also difficult to assess in that it's not possible to put an exact price on Pain and Suffering. OTHER INVESTIGATION CONSIDERATIONS Fire If there are any suspicions surrounding a claim of this type, insurers will make enquiries into the background of the insured. Theft Immediate notice of the theft should be given to the police. If the claim is settled, a Discharge Form will be signed by the insured. If the vehicle is subsequently recovered, it becomes the property of the insurer who may agree to return it to the insured in exchange for the claim money paid to him. Total Loss A Total Loss occurs when a vehicle has been damaged beyond economic repair, usually when the estimated cost of repairs is equivalent to or more than the market value. The insurer's right to dispose of the salvage arises only when the insured has received full indemnity. ASSESSMENTS ASSESSORS Are normally independent persons or companies contracted by Insurers on all but the smallest claims to:- > inspect the damaged vehicles - Insured o r Third Party. 9 check the repairer's estimate and make adjustments as appropriate for depreciation/ unjustifiable items. 9 estimate probable repair time needed if a Loss of Use Claim is to be submitted comment if parts are available and to thereafter submit their report to insurers for approval 9 Review specimen report (Note that assessors do not usually approve repairs but merely recommend approval)  OWN DAMAGE CLAIMS For insurers to deal with a claim for damage the insured vehicle, the cover in force must be either: 1. Third Party Fire & Theft or 2. Comprehensive. The amount claimed must exceed the Policy Excess and such claims must be admissible under the policy. Motor Policies provide that the insurers shall have the option as to the method of indemnity subject to the overall limits - i.e. to REPAIR REPLACE or pay CASH EXCESS /OR DEDUCTIBLE1 The applicable Excess will be deducted from the assessed loss. This is the amount of the loss which will be borne by the insured and is usually expressed as a percentage of the Sum Insured. The excess is also an uninsured loss. Other excesses may also be taken into account - such as special excess for under- age or inexperienced drivers. In compliance with the principle of Indemnity Own damage settlements will be based on the MARKET VALUE of the vehicle at the time of the loss or damage DISCHARGE Once a settlement is agreed between the insurer and their insured, the insured is required to sign a DISCHARGE before the agreed compensation is paid out. The function of the Discharge is to ensure that the amount of compensation paid is final, and t o prevent the insured coming back to the company a t a later date and raising new items for consideration. THIRD PARTY CLAIMS These can normally be divided into two categories; i.e. (1)Property damage and (2) Personal Injury PROPERTY DAMAGE CLAIMS Once the extent of the damage has been agreed by either, assessor, adjuster or claims staff, the adjusted figure is discussed with the claimant to arrive at an appropriate apportionment of liability, where one party is not totally to be blamed for the accident. PERSONAL INIURY Any claim for personal injury can only be considered when supported by appropriate documentation including medical evidence. The insurer may wish to have the claimant medically examined by a doctor of their choice. Claims under this section are normally divided into two categories, namely Special Damages and General Damages. Special Damages comprise items which can be easily calculated, or verified and include:- Medical Bills (e.g. doctor / hospital bills, physiotherapy) Loss of Wages arising as a direct result of the injury Travel Expenses Home Help / Care Loss of personal property (e.g. motor vehicle, clothing) Loss of Use Legal Costs General Damages takes into account items for which there is no easy way of calculating value. As such precedent cases and statistical information is used to determine appropriate compensation, and items under this category include:- Pain and suffering Loss of Amenities (loss of pleasures of life such as sports, etc.) Loss of future earnings (if incapacity is permanent and affects earning capacity in the future) Handicap on the Labor (if injury is disabling) Future Medical Care (if injured party requires care for the rest of their lives as a direct result of the injury) Legal considerations In all third party claims a decision must be made as to: DEGREE OF LIABILITY - that is, whose fault was the accident - and who therefore will be paying what. NEGLIGENCE Motor Insurance Legislation is based on the COMMON LAW principle of TORT and it is fitting at this stage to review some aspects of Liability with emphasis on the tort of negligence. A TORT is a 'Civil wrong'. People have certain obligations and duties imposed upon them. Failure to observe these can lead to another person suffering loss of property or personal injury. A tort can be corrected or redressed through COMPENSATION. Of the four main torts - (Negligence, Nuisance, Trespass, and Defamation), negligence is by far the most common as can be seen in the numerous motor insurance third party claims. Negligence may be defined as "the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do." Proof of negligence In order to succeed in a claim for negligence, the plaintiff must prove the following:- i) that the defendant owed a duty to the plaintiff to take care, ii) that the defendant was in breach of that duty. iii) that the breach of duty resulted from a lack of reasonable care on the part of the defendant; iv) that the plaintiff suffered loss as a result of the breach of duty., Defences There are many defences to a claim for negligence - including the obvious denial, but the most successful means of limiting liability and reducing a Third Party's claim is proof of CONTRIBUTORY NEGLIGENCE This means that the defendant needs to prove that the third party has contributed to the accident; the Court may reduce the damages or compensation recoverable by the plaintiff in accordance with the degree to which he was himself at fault In other words, if the plaintiff was twenty-five percent (25%) to be blamed, his compensation would be reduced by 25%.  PASSENGER NEGLIGENCE Claims may arise as a result of negligent acts by a passenger in a motor vehicle; such as the passenger negligently opening a door in the path of, and causing injury to, e.g., an unaware pedestrian or cyclist. Most Companies offer this cover under their private car policy and on request will add to a Commercial vehicle policy. But the company will only indemnify the passenger if the insured requests it and if the passenger is not entitled to indemnity under any other Policy (E.G. - Liability cover under a household policy) VICARIOUS LIABILITY One person may be held liable for the Acts or omissions of another. I t is an accepted Common Law Principle that an employer is liable for the negligence of his servants or employees whilst they are acting within the scope of their employment. I t is quite possible that the negligent party (driver) cannot satisfy a judgement and so nearly all writs show the driver as the first defendant and the employer as the second. FAMOUS CASE:- LIMPUS V LONDON GENERAL ONINBUS COMPANY 1862 A bus driver was expressly forbidden to race other buses. The driver did race and as a result caused a collision. Held: Employer liable: Driver was doing an Authorised Act but in an Unauthorised manner. RELEASE In Jamaica the word a release is normally used interchangeably with the term discharge. In reality however a Release is a document signed by a Third Party, discharging the insured's responsibility to them for a specific event, in acceptance of an agreed compensation. EX-GRATIA PAYMENTS These are payments made out of grace or kindness, and not out of legal obligation under contract. Sometimes policyholders have no legal right to a claim payment because the event causing loss or the property damaged or lost is outside the scope of the policy. Occasionally where the decision on liability was a borderline one, or there is some genuine oversight, or hardship would be created, or the case involves a well valued client or broker, a payment or part-payment will be made to ensure the good name of the company. Reasons for Ex Gratia Pavment > Importance of Insured to company. > Size of Insurance Portfolio of Insured > Good claims record of policy > Long standing client > overall the Insured Account is in profit Such payments should be made sparingly as the insurer is in a sense a trustee of the common pool to be used for paying claims covered by the policy. UNINSURED LOSSES These refer to losses for which the insurer is not responsible and for which the claimant may sue the responsible third party and will include; Loss of use/Cost of alternative transportation This "consequential loss" can be bought under a comprehensive policy, but will have limits, such as fourteen days; in addition to a monetary limit for any one claim and the insured will not be permitted to rent alternative transportation which is more expensive to operate than the insured vehicle. Consequently any amounts which exceed these limits, deemed "uninsured" can only be recovered by the insured from any third party considered responsible. Policy Excess/Deductible The mandatory Excess imposed on own damage claims ttdw~ 8 f n ~ e h e ~ s i u e f l ~ s n a t ~ c l ~byethe r a insurer h l e in the exercise of - - - his subrogation rights against any liable third party. Again this becomes the responsibility of the insured to recover such sums. No Claim Bonus A No Claim Bonus (or a part of it) may be lost because of an accident in which the insured is not at fault. Such is not reinstated unless and until insurers recover (through subrogation) what they have paid their insured. If it is never recovered the insured may sue the third party. Under-insurance and salvage In the case of total losses, any assessed value over and above the sum insured under the policy will belong to the insured (after applying the excess). This will therefore include any salvage. POLICY CONDITIONS GOVERNING CLAIMS Notification The policyholder has to give immediate notification of all accidents likely to give rise to a claim and to forward to the insurer notifications of all claims made upon him and any legal proceedings such as a Writ of Summons. The insured should not admit liability to anyone without the insurers' consent. He should provide all information and documents as required by the company. In case of Theft/Malicious Damage; notify the police immediately. Contribution If there is another policy in force covering the same risk, the insurer will only be liable to pay a ratable proportion of any loss sustained. Private car insurances commonly provide personal accident benefits for the policy holder and perhaps the policyholder's spouse. Such benefits are not indemnities hence excluded from the contribution condition. Subrogation This condition gives the insurer the right to conduct negotiations in the policyholder's name and to make recoveries from third parties in order to reduce their outlay. The policyholder must cooperate and must not handle any claim himself. Arbitration Where a claim has been accepted but there is a disagreement about the amount to be paid, the matter will be referred to an arbitrator appointed in accordance with current statutory provisions. When this happens, an award must be made before proceedings can be commenced against insurers. This clause provides for disputes in respect of quantum to be referred to an independent arbitrator before any legal action can take place. The most likely cause of dispute between a policyholder and his insurers which could lead to arbitration is the value of the insured vehicle which is deemed a total loss. Application of Limits of Indemnity In the event that more than one person is entitled to indemnity in an accident, this clause ensures that the insurer shall not pay more than the limit stated in the policy. INTER-COMPANY CLAIMS AGREEMENT Agreements which simplify the handling of claims to save costs. The Agreements applicable to Jamaica are:- The Knock For Knock Ameement The Knock For Knock Agreement is an agreement between insurers whereby they agree to pay the damage to its own policyholder's vehicle, if such damage is insured, irrespective of responsibility for the accident. (Vehicles must be comprehensively insured). The Knock Halving Ameement This Agreement is similar to the Knock for Knock Agreement, but is applicable where there are two vehicles involved in an accident, one of which is insured comprehensively and the other Third Party. One half of the expenses incurred by the Insurer of the vehicle with the comprehensive policy will be reimbursed by the insurer of the vehicle with the Third Party policy.