For many years perhaps right up until the Thatcher years of the 1980s attitudes in business and towards insurance companies in particular, were different; clients tended to remain with the same insurance company for years and there was considerably less “shopping around” than there is today. In turn the insurance company’s approach to the client was different; if you were a loyal client that had been with the company for years they would on occasions consider paying a claim that they might have otherwise rejected. In today’s more commercial world, for an Insurance company to pay a claim, where they believe they have grounds for declining it, the claimant would need to be a very sizeable client, representing a considerable amount of profitability to the company, loyalty is unlikely to play a part in the decision.
Contract hire companies nowadays see many cases where insurers have refused to pay out on claims following accidents. Naturally the larger a claim the more closely an insurance company will scrutinise it; if one of your company vehicles has a minor accident it does not make financial sense for the insurer to spend too much time on the claim. If however it is a major accident there are very sound commercial reasons why the insurance company will closely examine all aspects of the claim and the circumstances surrounding it. An Insurance company’s obligation is to its shareholders, which doesn’t include paying out on claims, if they can find good reason to invalidate it.
Many companies with company cars are not aware that the motor insurer’s terms and condition state that a vehicle must not be modified in any way, without advising them of the changes. It is for this reason safer to fit the manufacturer’s recommended tyres, with the correct speed rating. It is important that employees understand that they must not change or modify their company vehicle in any way, in order not to run the risk of invalidating the insurance. Some employers have discovered, following an accident, that an employee has done what is know as “chip” the company vehicle’s engine. This has the effect of increasing the car’s horsepower. The insurer will often, with justification, refuse to pay out a claim, because the car is more powerful than the vehicle they understood they were insuring. It also causes another problem in that it can invalidate the car’s warranty. In this eventuality it could cause the contract hire or leasing company to make a claim against the hirer; if the vehicle were for example on two years contract hire, then the hirer would be returning the vehicle without its third year warranty.
It is important to remember that an insurer requires the insured to keep a vehicle in a roadworthy condition. A high proportion of company cars are on contract hire; they are serviced regularly and are generally under warranty. Any faults or potential faults are normally rectified, by the dealership under the manufacturer’s warranty, when the vehicle is in for its service. Some companies purchase and keep their company cars for up to 4 or 5 years. Ensuring that the vehicle is always in a roadworthy condition is much more difficult under these circumstances, particularly if the mileage is high.
There are however, apart from lack of maintenance, many things that can cause a car to be un-roadworthy; if one of your company vehicles is in an accident and it is found to have the wrong tyre pressures, with the tyres under, over or unevenly inflated this could be a serious problem. It would of course depend on the circumstances of the accident; if another vehicle drove into the rear of an employee’s stationary car, it could hardly be considered a factor and it is very unlikely under these circumstances that the insurer would check the car’s roadworthiness; they would have no reason to do so.
If the circumstances of the accident were different, if say your employee’s vehicle skidded and crashed into another vehicle or failed to negotiate a bend and crashed, then it is quite possible that the insurer will carry out various checks on the vehicle, to ensure that it was roadworthy. Driving with the incorrect tyre pressure can be very dangerous; it can affect braking, steering, road holding and the general stability of the car. Employee’s need to be advised that they must check their tyre pressure on a regular basis, tyres are best checked when they are cold. The incorrect tyre pressure apart from the increased risk of having an accident will also significantly increase your overall fuel bill.
It is also important that tyre wear is regularly monitored to ensure that tyres do not go below the legal limit; with servicing intervals at 18,000 miles and more, one cannot rely on being advised during servicing, that it is necessary to consider changing tyres. Having tyres that are below the legal limit is not maintaining a car in a roadworthy condition. Sometimes only part of the tyre is worn; running the car with the incorrect tyre pressure can cause this.
Another risk to the company is employees driving whilst under the influence of alcohol or drugs, an insurance company will not generally pay out if there is an accident under these circumstances. How many of your employees stop of for a “couple” of pints on the way home? In a study carried out in 1998, alcohol was a factor in 10% of fatal motorcycle accidents and 19% of cars and other vehicles involved in fatal crashes. In spite of greater awareness nowadays there are still drivers who seriously believe that they drive better after consuming alcohol. The evidence however shows that alcohol seriously impairs psychomotor skills and affects the brains ability to process information.
The position is essentially the same if the employee is driving the company vehicle, whilst under the effects of drugs. Even if an employee is taking a prescription drug rather than recreational drugs, this could affect their ability to drive in a safe manner. Following new legislation, effective from April 2008, it is the company’s responsibility to ensure that their employees are safe and this includes, whilst driving on company business
Another risk is when the insurance company believe that a loss has been caused by negligence on the part of the driver. An example of this would be where an employee has left his car, either on the drive or in the road, with the engine running; many do this in the winter so that when they get into the car, it is already heated up. If an employee does this, or leaves the keys in the car when at the petrol station and an opportunistic thief jumps in and drives off, the insurance company is unlikely to pay out.
There are employers that have never checked their employee’s driving licences, relying instead on a copy provided by the member of staff. Some photocopy the original and feel that this is satisfactory. Not considering the possibility that whilst in their employment the employee could be convicted for drunk driving and continue driving whilst disqualified. In the event of an accident it is inconceivable that the insurance company would be prepared to meet the claim. New legislation introduced in April 2008, makes the employers responsibility for the safety of their employees and others, including whilst the employee is driving on company business; if there were a death the employers could find themselves prosecuted.
If a company uses a contract hire broker to source their vehicles they could arrange for the broker to regularly check the employee’s driving licences; a licence checking service is offered by the more established contract hire and leasing brokers. This is the only way that a company can be sure an employee not been convicted of offences that they are unaware of and cause their insurance to be invalidated. This will also help them to avoid being prosecuted under new legislation introduced in April 2008.
If an insurer rejects a claim and the insured feels that the insurance company is unjustified, the case can be taken to The Financial Ombudsman. There have been many claims that insurance companies have refused to pay that the Financial Ombudsman has ruled should be paid, unfortunately many claimants just accept the insurance company’s decision. A client of ours had his car stolen in a carjacking incident, the insurers refused to settle the claim for the Mercedes Benz, valued at more that 60,000. They told the client that they had repeatedly written to him advising him that he must fit tracker to the car, which he had failed to do. However when it was pointed out to the insurance company, following legal advise, that they had not told the client that he would no longer covered in the event of theft, the insurance company settled the claim in full.
The following may help to prevent a claim from being declined by an insurer; company cars should be maintained regularly and tyre pressures need to be measured frequently to ensure pressures are correct and wear is even. It should be made clear to employees that they must not modify their car in any way and that they should not ignore any warning lights that show up. It can help to reduce drink driving amongst employees if they understand that they are likely to loose their job as well as their driving licence, if caught. They should also be advised of the risks of driving if taking any form of drugs, including some prescription drugs. Make employees aware that if they leave the car with the engine running there is a very real risk of it being stolen. Also using a contract hire and leasing broker to check employees driving licences, will avoid the risk of employees driving with undeclared convictions, or whilst disqualified.
Very often when motor insurance claims are declined, the insurer claims that the driver has been negligent. Some employers, perhaps with justification, worry that company car drivers are more prone to be negligent with the company car than they would perhaps with their own vehicle. It seems that negligence is a factor in accident claims not being paid, throughout the world; following an accident in America the insurer refused to pay a claim for accident that happened when the owner of a new motorhome thought the vehicle would drive itself after he had switched to cruise control. This did not stop him taking legal action against the manufacturer of the motorhome claiming that they should have told him that cruise control didn’t encompass steering, braking and knowing where to go etc. Common sense does not appear to be a factor in the American legal system; he won his case.