Pre-existing Hail Damage to Motor Vehicles – What Is the Insurance Position?

 

Hail falling on a vehicle – an expensive experience

On Boxing Day, one of the public was arguing on television that he expected his insurer to have a loophole to get out of paying for pre – existing hail damage to his vehicle now that the vehicle had suffered further damage.

With the huge hail storms in Melbourne and Perth during 2010 along with the many other smaller hail storms that occur there have been an enormous number of vehicles which were damaged prior to the Christmas Day hail storms in Melbourne and Whyalla at Christmas 2011.

Hail damage is typically insured under a comprehensive motor vehicle insurance policy. If a vehicle had pre-existing damage as at the Christmas 2011 hail storms then I would suggest four things have happened. Either:

1. The car was written off and retained by the Insured after receiving the payout.

2. The car was damaged at a dealer and purchased at a discount from the dealer or at auction.

3. The vehicle was not comprehensively insured at the time of the first lot of hail damage.

4. The vehicle was insured, but repairs have not been completed as yet. Due to the time between events, this is the least likely.

The vast majority of insurance policies covering property, which includes motor vehicles, only cover damage to the property that occurs during the period of insurance. It should not come as a surprise that it would not cover pre-existing damage which occurred prior to the current period of insurance. To suggest otherwise is like saying that anybody need not insure, have a burglary or fire then insure the property and claim the loss. Insurers could, of course, do this. The premium would be the value of the loss, plus administration costs, and an allowance for any other claims that may arise during the balance of the period of insurance. In other words; the normal premium plus the cost of the pre-exisitng damage. This just becomes a nonsense dollar-swapping exercise.

It is my recommendation that issues of any pre-existing damage be addressed at the underwriting stage of the process and not at the time of the claim. This is reinforced by the duty of disclosure clause included in the vast majority of policies (motor or otherwise).

A typical example taken from an Allianz Motor wording selected at random (policy reference POL284BAAUST  01/06/2010) states the following:

Duty of Disclosure – what you must tell us
Under the Insurance Contracts Act 1984 (the Act), you have a Duty of Disclosure. The Act requires that before a policy is entered into, you must give us certain information we need to decide whether to insure you and anyone else to be insured under the policy, and on what terms. Your Duty of Disclosure is different, depending on whether this is a new Policy or not.

• If you do not tell us
If you do not answer our questions in this way, we may reduce or refuse to pay a claim, or cancel the Policy. If you answer our questions fraudulently, we may refuse to pay a claim and treat the Policy as if it never existed.

Some insurers state they will not meet any claim on a vehicle that is not in good repair and free from rust or hail damage. For example, NRMA (policy code G012979  01/03/2009) states:

Your responsibilities when you are insured with us.

If you do not tell us the following we may refuse or reduce a claim, or cancel your Policy: you change the address where your vehicle is normally kept, you change the way you use your vehicle, you use your vehicle for a driver education course, you hire out your vehicle, your vehicle is not in a condition that meets registration requirements in your State or Territory, your vehicle is not in good order and repair, free from rust, mechanical, hail or unrepaired damage, or any other damage that would make it unsafe you use your vehicle for events relating to a motor vehicle club, bash or charity event.

Most insurers also clearly state their position in respect of what their duty is in the event of damage to a motor vehicle. I provide a few examples below.

Budget Direct Car Insurance (policy reference CAR 12/10/2011)

Repairs To The Car:

Our duty is to return the car to the condition it was in immediately before the damage happened. If we agree to additional repairs, painting or parts which improve the condition of the car, you may have to pay for the amount of the improvement.

Just Car Comprehensive Car Insurance (policy reference J01425  07/09/2011)

Your contribution to repair work:

If the repair of your car leaves it in a better condition than before it was damaged, we may ask you to contribute to the repair cost.  If we ask you to contribute we will always explain why, tell you how much it will be and how to pay it.

Youi Car Insurance  (policy reference CARPDS 0511  16/05/2011)

Car Cover Exclusion:

We will not pay for repair of any damage that existed prior to the start date of the policy.

I sincerely hope this explains the  position on pre-existing hail damage and why it should be so.

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Police Catch Expert Burglars

Police stamp out a master theft gang

My colleagues and I at LMI have been concerned at the increased number of very well planned robberies that have taken place over the last year or so and it was clear that a very clever gang was involved.

We were concerned that security companies may be involved and the chance of that cannot be overlooked. These losses involved high profile families and some very secure commercial premises. How they were able to evade sophisticated alarms, CCTV and open high quality safes was just too good to be true.

What is pleasing to hear and report is that Police have had a team based in New South Wales under surveillance while in Victoria and they caught them red-handed.

It is estimated that this one team is linked to over $65 million in stolen money and goods.

The link below to a newspaper article provides more information on the arrest.

http://www.heraldsun.com.au/news/more-news/accused-burglar-gets-bail-on-strict-terms/story-fn7x8me2-1226236652248

Theft continues to be a major cost to the insurance industry both in domestic insurance and commercial lines and it is good to see this gang caught. With the sort of money they have stolen, it would appear on the face of it, the $100,000 bail is far too light but I am not a criminal lawyer. I certainly hope this is not a sign of a lenient sentence.

It is not just the monetary losses that should be considered. This, of course, includes the damage caused by burglars, which can be considerable. It is also the huge emotional stress it puts on the victims of such robberies, whether it be a home occupier or business owner.

Pleasingly, LMI were able to assist the police in catching another gang, I would suggest far less sophisticated, who broke into an electrical retailer just prior to Christmas and got away, for a short time only, with nearly 1,000 iPads.

I am pleased to say we have an excellent relationship with the police, as does the insurance investigator who is in the same building as LMI in Melbourne, Peter Hiscock.

Well done to Victoria Police on these arrests.

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Tips on Reducing Theft over the Summer Holidays

Following on from my recent posting on the capture of a two gangs of thieves, I thought it appropriate to provide just a few tips based on my claims experience to reduce the chance of theft, particularly after getting and receiving all the Christmas presents and or braving the January sales.

Clearly the best recommendation of all is to make sure you have adequate and proper insurance in place should any of your prized possessions be stolen or damaged.

A new national survey by Trusted Choice® and the Independent Insurance Agents & Brokers of America found that 44% of respondents, representing more than 100 million people in the United States, said they have been a victim of burglary, robbery or another form of theft. Of those who said they were victims, only 40% said their stolen property was insured. With an estimated one in four homes not being insured in Australia and New Zealand and a much higher percentage of contents not being insured, I suspect the same percentages apply in our part of the world as found in the US study.

The reality is that no-one is immune to theft and we see with fire and weather-related events, far too many people find that they do not have adequate property insurance when ‘it’ happens to them.

With our hectic lifestyles, it is easy to overlook some of the basics. Having lived in Papua New Guinea for 3 years, I am particularly cautious about security, not only for property loss but also the safety of my family. I pass on to you some of the tips that I have learned.

At work or home:

  • Lock all doors and windows even when leaving the home or your place of work even for a short period of time.
  • Similarly, if the reception or the room immediately adjacent to the door is going to be left unattended keep the door locked.
  • Consider installing window locks, an alarm system and/or CCTV. The cost of the latter are much cheaper than ever before. Even dummy ones are a deterrent against theft and graffiti.
  • Keep gates and fences in good repair and keep them closed (locked if appropriate) at night and when away from the premises.
  • Put up a ‘Beware of the Dog’ sign even if you do not own a dog.
  • Break down boxes, especially for expensive electronics, into small pieces and discard them in non-clear garbage bags.
  • Keep expensive items (including gifts) hidden from view from outside windows.
  • Leave spare keys with a neighbour rather than hiding them outside, such as under doormats or in fake rocks. Worse still is the letter box or electric metre box. Burglars are not fooled by most hiding places. Another alternative is to purchase a secure key safe, such as in the photo. I have never seen one of these breached. They are available from good locksmiths and hardware stores and cost around $75. (Not cheap, but effective.)
  • Indoor and outdoor lights on movement sensor or an automatic timer should be used whenever possible.
  • When you’re away from your home for an extended period of time, have a neighbour or trusted friend watch your house and pick up newspapers and mail. As I am not very trusting, I do not tell the post office or the newsagent when I am away as you do not know who they tell. You should also continue to have the bins put out as normal.
  • While still on the subject of holidays, be careful of tipping people off that you are away by putting up photos of you on holidays or on a business trip in another state or country. Thieves use social media too!
  • Beware of strangers at your door. Criminals can pose as couriers delivering gifts or be soliciting donations for fake charitable causes. Ask for identification or information about the company or charity.
  • As I suggested earlier, many renters have no insurance and fewer and fewer home contents policies cover temporary removal. Check your own policy if you are travelling and if you are having guests, check what cover is available for them.
  • Valuable items, including, if you were luckier than me, gifts such as jewellery, antiques and collectibles may be limited under an insurance policy or worse still there may be no coverage at all under a standard homeowners policy. It is often necessary to seek and pay extra for an endorsement of cover or to take out separate coverage for such items.
  • Consider insuring your personal property on the same replacement cost basis as your home.

In the Car:

  • Lock all doors and roll up all windows, even when leaving the car for a short period of time.
  • Bring expensive items, including recent purchases or gifts, into your home, temporary accommodation or workplace rather than leaving them in your car.
  • While shopping, keep gifts in the boot or completely hidden from view in the interior of the vehicle.
  • Put all of your packages in the boot before leaving one parking area and driving to another. Waiting until your next shopping destination allows others to see your purchases/packages go into the boot of your car and then you departing into the shops.
  • Avoid parking next to vans and large trucks that block your space from the general vision of others. I hate getting dents in my car, which is more likely as the car parks seem to be getting narrower and narrower as they try and cram more cars in. I pick the furthest spot (even this gets difficult during peak holiday periods) and do a bit of extra walking but always within sight of other people. It is not only car doors, but shopping trolleys and vandalism I am trying to avoid.
  • Make a mental note or write down exactly where you park your car to avoid wandering around for longer than necessary. What I now do is take a photo of my car on my iPhone so I know where I parked. I have also downloaded a free map called take me to my car. As most of my parking is at the airport, I am yet to use the App but the photo on the phone has been a Godsend.
  • At night, avoid secluded areas and park directly under lights whenever possible.
  • Look underneath your car before you reach it when returning from shopping; criminals have been known to lie underneath and wait, while drunks and the like do stupid things and get run over.

While Shopping:

  • Use a credit card in order to avoid thefts of large amounts of cash that cannot be replaced.
  • Shopping with a single credit card is preferable—it is easier to cancel one, rather than several, if your wallet or purse is stolen.
  • Do not let the credit card out of sight as skimming the card is getting more prevalent.
  • Be careful with your PIN. Put your hand over the keypad while punching it in and keep a look out for people near you and video cameras, which may be hidden.
  • Keep bags and purses closed/zipped up and in your possession and close to your body rather than leaving it in your shopping cart where it is more susceptible to theft.
  • My wife, Helen, saved her bag from a very determined bag snatcher by having the strap over her head rather than simply resting it on the same shoulder as the side she was carrying the bag.
  • Be sure to keep a reference list of phone and account numbers for all your credit cards in a safe place at home. I use ContinuityCoach.com to keep copies of my passport and things like this as I know it is secure and I can down load it from any computer or phone connected to the net.
  • Try to carry keys, cash and credit cards separate from each other.
  • For freedom of motion and clear visibility, do not overload yourself with packages when leaving a store and returning to your car. You cannot defend yourself with your arms too full of bundles.
  • Use ATMs in well-populated, well-lit locations. Do not throw ATM receipts away at the ATM location.
  • Remember there is increased safety in numbers. Avoid walking alone and leave malls and stores well before closing time to assure a more active parking lot.

Pets:

  • The holiday season often includes images of cute puppies under a Christmas tree or a kitten with a sparkly ribbon around its neck. New and potential pet owners need to understand that no matter what they paid for their pet, most homeowners’ insurance policies exclude animals. So if your pet is stolen, it is not likely you will be able to claim it as a loss with your insurance company. Not all pet insurance covers theft either.

Conclusion:

I have two final hints in closing.

If you are having some time off, it is a good idea to conduct a home inventory during or immediately after the holidays and make sure that any new items in the home are properly insured.

I know there is a tendency to buy home and contents insurance off the net. More and more people are even buying their business insurance that way. Unless you are 100% sure of what you are buying, please consider using a competent insurance broker. I do, even though I have been a student of insurance for over 40 years and invented LMI PolicyComparison.com, which currently compares over 3,000 policies including over 200 home and contents policies.

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