There was a time many years ago when a company could be paid out on an insurance claim for no reason, other than for being a good and loyal client to the insurance company. Whilst it is possible that even today an insurance company could make a commercial decision when considering a claim from a very large client, many companies are at risk of having claims repudiated.
When a vehicle is on contract hire, the contract hire company owns the vehicle but the hirer insures it. Therefore when an insurance company refuses to pay a claim, the hirer becomes responsible and contract hire companies are seeing this happen more frequently. In the case of minor accidents, insurance companies rarely look too closely at the circumstances. However in the event of a serious accident, it makes very sound financial sense for the insurance company to examine the circumstances of the accident and take a close look at the driver. An insurance company is answerable to its shareholders and its shareholders would not appreciate it paying out claims when it has good grounds for refusing to do so.
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.
The vehicle must also be roadworthy to comply with the insurance company's terms and conditions. Contract hire vehicles, as most company car are nowadays, are generally relatively new and regularly serviced. If however a company runs its own vehicles and keeps them for perhaps four or five years, then the condition of the cars needs to be monitored more closely, particularly if they are doing high mileage.
It is not only lack of maintenance that can cause a vehicle to be un roadworthy, it can often be a failing on the part of the driver; incorrect tyre pressure is the most common reason. Driving with the tyres incorrectly inflated can be very dangerous, particularly if the roads are wet. If one of the company vehicles is in an accident and the accident is of a serious nature, then the insurance company will normally check the vehicle's roadworthiness. Of course if another motorist were clearly at fault then the insurer would have no reason to check the condition of the vehicle.
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.
A risk to the company's insurance cover that is often overlooked by companies is when employees drive their company cars whilst having exceeded the legal limit of alcohol consumption. The risk is higher outside of office hours, when employees stop for a drink on their way home, or at weekends. Whilst it may be outside office hours, it is still the company's vehicle and insurance. It was revealed in a study in 1998 that in 10% of motorcycle accidents where there was a fatality and 19% of fatal car accidents, alcohol was involved. It seems extraordinary that even today with all the increased publicity, there are drivers who believe their driving skills are enhanced following alcohol consumption.
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
Employees should also be told that they must not, however cold the weather is, go out and start the car and leave the engine running to warm the car up. However comfortable this may make the drive into work, it is highly risky; if someone got into the car and drove off, as has happened many times, the insurance company will not pay out for a vehicle stolen under these circumstances. The same applies if an employee leaves the keys in the car at a petrol station whilst they go to the cash desk.
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 contract hire broker is being used to source the company vehicles, most established contract hire brokers offer a licence checking service, if not there are other companies that specialise in providing a licence checking service. Regularly checking an employee's driving licence is the only way a company can be sure that this type situation does not arise. An employee could be disqualified, or have accrued other convictions after the company has taken a copy of the licence. It is important to have these checks carried out not only to ensure the company's insurance is not invalidated but also to protect the company in view of the new legislation.
If an insurer rejects a claim, it does not necessarily follow that they have acted correctly. There have been many such decisions by insurance companies, which have subsequently been overturned by the Financial Ombudsman, the body that deals with disputes or complaints against insurance companies. In a case that involved one of our clients, the insurance company refused to settle a claim in excess of 60,000 following a car jacking. They justified this because the vehicle did not have tracker fitted, in spite of the fact that they had told the client on many occasions that it was a requirement. The client, who disagreed with the insurer's decision, called in an expert. The expert said that whilst the insurer had told the client he must have Tracker fitted, they had not written to the client and told him they were no longer providing cover. The expert's views were made known to the company and the claim was settled in full, soon after.
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. - 16089
When a vehicle is on contract hire, the contract hire company owns the vehicle but the hirer insures it. Therefore when an insurance company refuses to pay a claim, the hirer becomes responsible and contract hire companies are seeing this happen more frequently. In the case of minor accidents, insurance companies rarely look too closely at the circumstances. However in the event of a serious accident, it makes very sound financial sense for the insurance company to examine the circumstances of the accident and take a close look at the driver. An insurance company is answerable to its shareholders and its shareholders would not appreciate it paying out claims when it has good grounds for refusing to do so.
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.
The vehicle must also be roadworthy to comply with the insurance company's terms and conditions. Contract hire vehicles, as most company car are nowadays, are generally relatively new and regularly serviced. If however a company runs its own vehicles and keeps them for perhaps four or five years, then the condition of the cars needs to be monitored more closely, particularly if they are doing high mileage.
It is not only lack of maintenance that can cause a vehicle to be un roadworthy, it can often be a failing on the part of the driver; incorrect tyre pressure is the most common reason. Driving with the tyres incorrectly inflated can be very dangerous, particularly if the roads are wet. If one of the company vehicles is in an accident and the accident is of a serious nature, then the insurance company will normally check the vehicle's roadworthiness. Of course if another motorist were clearly at fault then the insurer would have no reason to check the condition of the vehicle.
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.
A risk to the company's insurance cover that is often overlooked by companies is when employees drive their company cars whilst having exceeded the legal limit of alcohol consumption. The risk is higher outside of office hours, when employees stop for a drink on their way home, or at weekends. Whilst it may be outside office hours, it is still the company's vehicle and insurance. It was revealed in a study in 1998 that in 10% of motorcycle accidents where there was a fatality and 19% of fatal car accidents, alcohol was involved. It seems extraordinary that even today with all the increased publicity, there are drivers who believe their driving skills are enhanced following alcohol consumption.
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
Employees should also be told that they must not, however cold the weather is, go out and start the car and leave the engine running to warm the car up. However comfortable this may make the drive into work, it is highly risky; if someone got into the car and drove off, as has happened many times, the insurance company will not pay out for a vehicle stolen under these circumstances. The same applies if an employee leaves the keys in the car at a petrol station whilst they go to the cash desk.
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 contract hire broker is being used to source the company vehicles, most established contract hire brokers offer a licence checking service, if not there are other companies that specialise in providing a licence checking service. Regularly checking an employee's driving licence is the only way a company can be sure that this type situation does not arise. An employee could be disqualified, or have accrued other convictions after the company has taken a copy of the licence. It is important to have these checks carried out not only to ensure the company's insurance is not invalidated but also to protect the company in view of the new legislation.
If an insurer rejects a claim, it does not necessarily follow that they have acted correctly. There have been many such decisions by insurance companies, which have subsequently been overturned by the Financial Ombudsman, the body that deals with disputes or complaints against insurance companies. In a case that involved one of our clients, the insurance company refused to settle a claim in excess of 60,000 following a car jacking. They justified this because the vehicle did not have tracker fitted, in spite of the fact that they had told the client on many occasions that it was a requirement. The client, who disagreed with the insurer's decision, called in an expert. The expert said that whilst the insurer had told the client he must have Tracker fitted, they had not written to the client and told him they were no longer providing cover. The expert's views were made known to the company and the claim was settled in full, soon after.
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. - 16089
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For more information about contract hire, lease purchase, finance lease or vehicle hire purchase in the UK please contact Bowater Price plc 01494 536 536.
