News

Beware the escape clause in Motor policies

News >>

Cheap motor insurance can have some tough exclusions
The Policy Comparison team at LMI have highlighted some new exclusions have been introduced by some of the “Cheapy” direct insurers.
Previously Motor Insurance wordings did not have an exclusion for “reckless acts” but this has now changed. 
Reckless driving is often defined as a mental state in which the driver displays a wanton disregard for the rules of the road; the driver misjudges common driving procedures, often causing accidents and other damages. The legal dictionary defines reckless driving as operation of an automobile in a dangerous manner under the circumstances, including speeding (or going too fast forthe conditions, even though within the posted speed limit), driving after drinking (but not drunk), having too many passengers inthe car, cutting in and out of traffic, failing to yield to other vehicles, and other negligent acts.

This brings it to where I have a real problem. Deliberate Acts are not negligent acts. Negligent Acts should always be covered by an Insurance policy as we are really dealing with mistakes made. Being able to prove a negligent act was in fact a deliberate one has been the onus on insurers, but these clauses will now make it easier.
Further, what makes it more confusing is that the terms ‘dangerous’, ‘reckless’ and ‘careless’ driving are sometimes used interchangeably and it can be difficult to work out the difference between the three terms and the penalties for the different offences. However, it is likely to be enough for a claim to be denied by these particular insurers.
What is most significant in one new version of an Insurer’s policy wording, it specifically states that the insurer will not cover driving into water or illegally using a mobile phone. While we would agree that using a mobile phone, particularly texting or doing emails on them while driving does definitely increase the risk of an accident, if an investigation team gave the opinion this was the likely cause, a claim would be rejected.
With the driving into water, this could be a deliberate act or on a dark night it could be a complete accident because you cannot see it in some circumstances. So in either case a mistake may be made but a claim will be denied.
At this stage, this clause has not found its way into any broker branded wordings but by being introduced by the direct insurers to obviously reduce prices, it may become more common place.
If you do have a claim denied with these exclusions, particularly the one regarding using a mobile phone. Not only does this mean you have no coverage for your own car, you have no third party property damage cover for any other car, or property you may hit. Using your mobile phone really could be life changing in more ways than one.
Interesting times but the message once again you should not purchase insurance on price alone. The coverage, the financial strength rating and the claims rating of the underwriter are much more important when you want to rely on the protection. If you are in doubt, you should seek the advice of a qualified insurance broker.
If using common sense, you would know that driving while using a mobile phone, particularly texting, does expose the driver and their passengers and other Motorists around you to increased danger. If it is that important to make the call or check your Facebook to read this post, pull over and do it safely!
I would like to thank Professor Allan Manning at LMI for highlighting these new exclusions which are often snuck into policy wordings without notice.

Last changed: Jun 27 2016 at 12:15 PM

Comments

  1. None Found

Add Comment

Latest News

D&O premium pool ‘must treble’ to return to profitability

A new report – called "Show Me The Money!" by insurer XL Catlin and law firm Wotton + Kearney – is the second in a series of three white papers on securities class actions and their impact on the Directors & Officers Liability (D&O) market. The main conclusion is that Directors’ and officers’ (D&O) insurance premiums are under-priced significantly and need to rise strongly to restore profitability. The main risk areas are those exposed to securities class actions, 

It says Directors & Officer's Side A, Side B and Side C cover has been chronically underpriced since at least 2011, while the frequency of class actions is increasing as more plaintiff lawyers and litigation funders enter the space.

The analysis suggests last year’s overall premium pool of about $210 million would need to increase by at least three times to establish a profitable market, if it is assumed all other factors stay unchanged.

“Recent market developments would indicate most D&O insurers are now endeavouring to restore some semblance of profitability to their portfolios after years of market losses,” the report says.

read more

75% of Cyclone Debbie claims settled

In the 6 months since Cyclone Debbie devastated Queensland and parts of northern New South Wales:

• more than 31,000 homes and business have been repaired or received settlements from their insurance company

• more than 20,000 families have had possessions replaced

• more than 4,500 motor vehicles have been repaired or new vehicles provided

• hundreds of local builders and trades have been working on properties to repair the damage and destruction caused by the cyclone

• over $5 million has been paid EACH DAY to assist local communities, residents and businesses.

read more