Oils Ain’t Oils When it Comes to Policy Wordings – Don’t you get Caught!

Metaphor Compare Apples To Oranges LightA broker approached LMI with a problem in that he had moved a motor vehicle policy with an Agreed Value to what he thought was a similar coverage, but called Nominated Value. Regrettably, it was a case of apples and oranges with the terms meaning different things.

The definition of Nominated Value in the new policy is stated as:

Nominated value

Nominated value means the amount specified as the Nominated Value, exclusive of GST, in the schedule.

This amount includes standard accessories, tools and spare parts that the manufacturer supplies as standard equipment with your vehicle, and any Vehicle Accessories specified in the schedule.

He read this and thought all was good and moved the policy to the new insurer.

A claim occurred and the vehicle was deemed to be a total loss. It was then it was pointed out to him that the Basis of Settlement stated:

Basis of Settlement – Section 1

The following Basis of Settlement will apply:

Total loss

(b) Nominated value

When your vehicle is stolen and not recovered, lost and not recovered, or damaged and we do not consider it economical to repair your vehicle, then if nominated value is stated in the schedule as the Basis of Settlement then the maximum amount we will pay for your vehicle is the lesser of:

  • the nominated value; or
  • the market value plus 15%.

Provided that the maximum amount we will pay in respect of Vehicle Accessories is the value of those Vehicle Accessories shown in the schedule.”

Here the Nominated Value was $15,000 but the market value was deemed to be only $10,000. The broker is now trying to explain to his client why the client has been charged premium on $15,000 and is only getting $11,500 when he [the Insured] thought he had an Agreed Value policy as he did before.

I can understand why an underwriter would wish to cap the amount that they would like to pay above the true market value of a vehicle but it is cold comfort for the Insured or their broker.

headerEven with motor policies, it is always wise to include a product comparison from PolicyComparison.com with the sub-mission and to quickly scan it for any traps like this. Few policies are the same and a few seconds to obtain the comparison can save a whole lot of grief.

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