The Insurance Review - October 2010
THE ANATOMY OF A CLAIM
By Roland L. Enz - President, California Plus Insurance
The last thing you plan on or consider is the possibility of an insurance claim. Believe me, it is not going to always be “the other guy” – it will eventually catch up to you. The longer that you are in the cab of your truck, the more the possibility of a claim increases. The cost of a claim is rarely considered, but it should be high on your priority of financial reserves. No matter how much or what kind of insurance you have, you will always lose when there is a claim.
Claims come from different areas of loss – Liability, Physical Damage and Cargo. These three coverages, plus, in some cases, General Liability, make up your insurance package. The event of a claim can be at-fault, non-fault or anything in-between. At the end of each policy year, ask your insurance agent for a “Loss Run” even if you have had no claims. It is important to have this in your file. If you have had a claim, it will show how much was paid out. If the claim has not been settled, it will show how much is reserved for the claim. Insurance companies have a habit of reserving claims high, and in many cases it still shows up long after the claim is settled.
Your insurance policy is a contract between you and the insurance company. This agreement obligates the payment, of certain outlined claims, by the insurance company. These payments differ from those that affect you and those that affect a third party, in the event that you are at fault. It is your responsibility to understand what is and what is not in the policy. You can not ask for or expect something from your insurance carrier that is not in the agreement.
The Liability part of the policy covers and protects what you have a responsibility to when you are at fault. The coverage is third party. This coverage consists of Bodily Injury and Property Damage. Do not consider this as protection for your own property – it does not cover the non-owned trailer or cargo that you are hauling (this coverage can be purchased as a separate part of your package). If you have damage to your vehicles or damage to the cargo, that will be considered under those parts of the policy pertaining to those coverages, if you have purchased them.
If you are involved in an accident, never admit responsibility. When asked, give only the basic information like your name, your address and your insurance information. Let the insurance company respond on your behalf. That is their job. Gather as much information at the scene as possible for your defense (if it comes to that). Your responsibility, in a liability claim, is to communicate with your insurance company. Timely information will provide with you with the best defense. Cooperation with your insurance adjustor is essential. Beware of the other parties’ insurance company contacting you for statements and information. Stop! Let your insurance company take care of it. If it comes down to a law suit, take the direction and advice your insurance company gives you.
A Physical Damage loss can arise out of either an at-fault accident or a non-fault accident. Report both types of losses to your insurance company at once. If you are at fault, or in the event that the other party does not have insurance or their coverage is inadequate, the loss will be settled per your insurance policy. Your policy outlines what the insurance company will and will not pay for. Generally, the insurance company will pay for towing to a repair facility and will pay for an agreed repair. In the event of a total loss, they will pay for the value of the vehicle. But here comes the rub – in no case will the insurance company pay any more than the actual value of the vehicle. Do not insure your vehicles for any more than what they are worth – you will just be wasting your money.
During the claim process, you will have out-of-pocket expenses. Some will be reimbursed, but you will soon find out that there is still be a big hole in your wallet. Towing companies require payment up front. Your insurance company will reimburse you for the cost, but not right away. Your personal possessions will also not be covered. Some policies have additional coverages that may cover this sort of thing or your homeowner’s insurance may cover it, but not always. Your transportation and lodging are also your responsibility. There is no coverage for covering the cost of renting a replacement vehicle. Your policy will cover the liability for a replacement vehicle, but it will not cover the physical damage. You will be required to either purchase the coverage from the rental company or pay your insurance company for the additional insurance. Paid downtime generally does not exist. Some policies may provide this coverage, and in some instances it may be available to buy, but it is very limited, if available at all. As you can see, the costs add up quickly. I cannot stress the necessity for a reserve for this type of event. The same goes for the possibility of a major mechanical failure that will take you out of service – being prepared is the best plan of action.
In the event that you are involved in an accident that you were not at fault, you are entitled to recover, from the other party or parties’ insurance carrier, not only the physical damage costs but additional costs. Before we go into this, the other party has to have sufficient coverage to cover the loss. If the other party has minimum limits (depending on each state’s financial requirements), there may not be enough money to pay for your entire claim. Also, the other parties’ insurance company will only pay when they accept responsibility. And even if this happens, it will take time, and you will spend a substantial amount of money until it is resolved.
If an accident was not your fault, you are entitled for the loss of your equipment and the loss of revenue. You’re entitled to your expenses, including lodging, travel and the expense of renting equipment. As you can see, in the event of a loss that was covered by another parties’ insurance, there are many additional sources of recovery than what your coverage provides alone. If the other parties’ insurance does not respond, or if they deny the claim, two things will have to take place; 1) your insurance company will have to go after the other parties’ insurance company for recovery of their costs plus your out-of-pocket deductible; and 2) you will have to hire an attorney on your own to sue the other party for the expenses that you accrued from the loss. Not fun!
Cargo losses stem from many areas. I will devote my next article entirely to the cargo policy and claims process. Medical is another issue that I will discuss separately in another article at a later date. Remember, the best thing you can do is understand your policy (your coverages) and always be prepared (financially and otherwise) for the worst. If you have any comments or questions, I can be reached through California Plus Insurance Service in Modesto, CA at 1-800-699-7101.