Essentials of Loss Adjusting C110

Study 8 Automobile Physical Damage Claims

What six areas must a loss adjuster have knowledge of in order to handle automobile claims?

The loss adjuster must have knowledge of

            1. Civil Code of Quebec or the applicable provincial common law system

            2. Provincial automobile insurance legislation

            3. Highway safety legislation

            4. Special agreements derived from legislation for example direct compensation agreements

            5. Policy wordings and endorsements

            6. Reciprocal claims agreements between provinces

Outline the typical automobile coverage agreements that apply to property damage claims.

What type of coverage is provided by the specified perils insuring agreement under the automobile policy? What type of coverage is provided by the all perils insuring agreement under the automobile policy?

Specified perils covers loss or damage caused by fire, lightning, theft or attempted theft, windstorm, hail, earthquake, explosion, riot or civil commotion, falling for forced landing or aircraft or falling aircraft parts, rising water, or by stranding, sinking, burning, derailment or collision of any boat, railcar, truck or conveyance that is transporting the automobile.

Collision or upset covers loss or damage caused by collision with another object or by upset of the automobile (usually rollover). It covers damage whether or not the insured is at fault.

Comprehensive perils cover the loss or damage except that covered under the collision peril. Losses excluded are theft by a member of the household, damage arising from mechanical failure or corrosion, and the loss or theft of audio tapes or compact discs not in a player installed in the automobile. Comprehensive covers more perils that the specified perils.

All perils coverage provides all types of losses except those that are specifically excluded. It is the broadest coverage available.

Deductibles usually apply to an insured’s own physical damage loss.

All perils, comprehensive perils and specified perils provided limited loss of use coverage.

Coverage is in the continental US and Canada and points in between and on vessels.

Lienholders are named as joint payee on claims.

Claims arising from illegal use of an automobile are excluded from coverage.

In what way can a policy coverage change when an insured is driving a temporary substitute vehicle?

If an insured is driving a temporary substitute, the insured’s own policy may provide coverage. If the deductible under the insured’s policy is a lower amount than the deductible under the insurance carried by the owner of the temp sub auto, such an insuring agreement covers the difference in the deductibles. If the owner of the temp sub auto does not carry physical damage coverage, and if the loss is covered by the insured’s policy, then there is coverage for the damage substitute auto subject to the provisions of the insured’s policy.

What coverage does a loss of use endorsement entitle the insured to?

A loss of use endorsement entitles the insured to be reimbursed for reasonable amounts incurred for transportation up to a certain limit, whether or not the insured is at fault for an accident. The coverage specifies a daily limit subject to an overall limit.

When the insured carries any of the coverages for his or her own vehicle damage other than collision, there is automatic coverage for loss of use. Insurers operating in jurisdictions with direct compensation agreements will give their not at fault policyholders the benefit of full indemnity despite the loss of use coverage limit in effect.

Explain what coverage a blanket basis fleet endorsement provides.

A blanket basis fleet endorsement provides that all automobiles owned by the named insured during the term of the policy are insured without being identified specifically. This typically applies to larger commercial businesses.

Discuss how absolute liability provisions affect automobile claims.

What is the purpose of an absolute liability provision in provincial insurance legislation?

An absolute liability provision in provincial insurance legislation prohibits insurers from denying a claim to a third party based on the insured cancelling the policy after the event that gave rise to the claim or contravening a policy condition. Under such circumstances, coverage is limited to a minimum amount set by the jurisdiction.

The insurer has the right to pursue recovery against the insured for any sums it is required to pay to a third party because of the absolute liability provisions.

What role does an appraiser play in assessing automobile coverage?

A professional appraiser usually assesses the damage, prepares a repair quote, and then comes to an agreement with a repair shop on the cost of repairs. The appraiser may also conduct a total loss evaluation. Autos can be inspected anywhere, but usually at a garage so the appraiser can discuss any aspect of the repair process with the shop. The appraiser’s estimate is the most commonly used method of agreeing on a repair estimate and repair process.

What are direct repair programs used by an insurance claims departments?

Direct repair programs are used primarily for first party damage claims. Repair facilities must meet minimum standards to quality, having well trained staff to deal with the insured, adequate office space separate from the repair shop, and the capacity to handle the number of jobs required. Negotiated labor rates are predetermined to ensure that repair invoices meet defined terms. The insured can choose a conveniently located pre-approved garage to do repairs. The insured’s appraiser visits the garage periodically to inspect repair processes, monitoring the quality and cost of the work. The insured has the benefit of dealing with one facility and repairs are guaranteed.

When are estimates from repair garages appropriate?

Estimates from repair garages are appropriate when damage is minor and the loss occurs in a remote area where alternative methods to assess damage are not available economically. The insured may be asked to provide comparative estimates, usually two or three from different garages. They are reviewed for cost and scope of work and then approved if appropriate. The appraiser will look for items being repaired or replace, what kind of equipment is used to do repairs. They will watch for underestimating the cost.

Why does a loss adjuster visit the scene of an accident as soon as possible?

The loss adjuster visits the scene of an accident to identify and preserve and valuable evidence. For example, physical evidence of foliage obscuring visibility at an intersection or the absence of a stop sign at a corner may not be apparent at a later date. Some knowledge of what took place is necessary in order to evaluate relevant evidence without subrogation possibilities in mind. Before taking any statement from the insured or the witness, it is useful to rough out a drawing of the accident.

Why should a loss adjuster maintain impartiality when drawing a diagram of an accident scene? How should the loss adjuster indicate parties involved in the accident in his or her diagram?

The diagram should include the accident locus to show the type of intersection, identify the location of the accident, label each street, show signage, indicate directions, if it is a parking lot how is it configured as well.

To maintain a sense of impartiality, especially when independent witnesses are involved, the diagram should not identify a driver as the insured, or the third party, or use any terms that would indicate an interest in one particular party. Instead a legend can be included and the diagram can use “A” to indicate the insured auto and B to identify the other auto.

What is the purpose of intercompany settlement charts?

Intercompany settlement charts provide an organized and predictable method of determining fault at a starting point. Unless the law requires it, fault determination based on the charts is not binding on the insureds. In Ontario, NB, and quebec direct compensation agreements provide fault charts similar. For property damage, claimants are compensated by their own insurer according to how much fault is assessed against them using the fault chart.

Explain what a loss adjuster would do if their independent witnesses to an accident being investigated.

Any third parties are contacted to confirm the facts of the accident and if possible obtain a statement. If a lawyer represents a third party, you must get the lawyers permission to contact the third party. The loss adjust will also look for independent witnesses, any uncooperative witnesses can be subpoenaed or summoned to provide testimony.

When might a loss adjuster decide to hire an expert in an automobile claim? Give an example of an expert that might be used.

Generally it is only appropriate to hire an expert when the amount of the claim justifies the expense and there is an opportunity to recover at least part of the claim paid. An accident reconstruction expert can be used to determine how an accident occurred, thereby establishing fault.

Why do most insurers prefer to have an insured’s automobile repaired as opposed to making a cash settlement?

The following reasons:

1. The safety of the automobile could be impaired if the insured fails to have the damage repaired immediately.

2. If the insured has another accident, overlapping damages could be paid twice, increasing claims costs.

3. Psychologically, there may be a tendency for people to exercise less care with a damaged automobile

4. The repair is considered to be a return to the pre-loss condition, thus discouraging fraud.

How does a loss adjuster assess an automobile’s worth in the case of a total loss?

Various ways to assess accurate market value.

1. Take the average selling price from three qualified used care dealers for automobiles of the same make and age, with similar equipment and of similar condition.

2. Newspaper ads, used auto publications and automobile evaluation guides

What details should be included in statements about automobile theft loss?

1. Who last had the automobile?

2. When and where was it last known to be?

3. What are the details of all special equipment installed on the automobile?

4. Is there a pre-existing mechanical or body damage?

Why does an automobile fire loss require careful scrutiny by a loss adjuster?

Because an automobile is ever rarely burned in an accidental fire unless it is in a garage or other building that completely burns down. The cause of the fire and the circumstances prior to the event must be investigated. The physical damage of the auto and surrounding scene require careful scrutiny by the adjuster.

List the steps involved for a loss adjuster when investigating an automobile fire?

1. Obtain statements from the owner and the person last in possession of the automobile.

2. Interview firefighters, police, the tow truck driver, and any other witnesses

3. Hire an expert to determine the cause if required

4. Check maintenance records of the automobile

5. Review the insured’s finances, including any liens on the automobile

6. Determine whether the insured had other insurance losses

7. Check for any recent changes in the policy, such as a reduced deductible or an increase in coverage

Give an example of a clue that might indicate to a loss adjuster that a fraudulent automobile fire claim has been made.

When physical damage of the automobile, along with findings of the investigation, indicates the possibility of fraud. For example, the melting of fusion of glass is indicates a high temperature and is cause for suspicion.

In Quebec, when does a loss adjuster apply the Direct Compensation Agreement to a collision?

Loss adjusters apply the DCA only to collisions on public highways in the province of Quebec involving two or more automobiles when the drivers have been identified. An arbitration board resolves disagreements between authorized insurers arising from the application of the DCA. Collision coverage is till required to cover situations that are not settled under the DCA and instances in which the insured is at fault.

When assessing liability, what issues should be ignored according to the DCA’s Driver Fault Chart?

The DCA’s driver fault chart calls for the following issues to be ignored.

1. Actions of pedestrians

2. Speed

3. Weather conditions

4. Road conditions

5. Light, sound, or hand signals

6. marked or unmarked road lines

How is recovery under the Direct Compensation – Property Damage agreement determined?

Recovery under the DCPD is based on degree of fault of the insured as determined by the application of fault determination rules. These are a series of legislated rules that cover most situations that occur in auto-to-auto collisions. No consideration is given to the circumstances in which the incident occurs, such as weather conditions, road conditions, visibility, actions of pedestrians, or the point of contact of the insured’s automobile with any other automobile. If the charts do not address the specific accident situation, then the ordinary rules of law are used to determine fault.

Describe the adjustment process for property damage automobile claims.

Outline the claims handling process for automobile accidents.

Explain how an automobile total loss claim could be settled.

Discuss the provisions of Quebec’s Direct Compensation – Property damage arrangement and how they are applied.

Describe how an automobile physical damage claim would be settled in Quebec, Ontario, Manitoba, Saskatchewan, and British Columbia.

Automobile Physical Damage Claims

• each province has its own automobile insurance legislation and its own standard automobile policy
• adjusters must refer to the policy wordings used in their own jurisdictions
• Review the standard policy for each province
• To handle automobile claims the loss adjuster must have knowledge of the following:
• Civil Code of Quebec or Common law
• Provincial automobile insurance legislation
• Highway safety legislation
• Special agreements derived from legislation (for example, the Direct Compensation Agreement)
• Policy wordings and endorsements
• Reciprocal agreements between provinces

Loss or Damage to the Insured's Automobile

• Collision or upset covers loss or damage caused by collision with another object
• Specified perils covers loss or damage caused by fire, lightning, etc.
• Comprehensive perils cover loss or damage except that covered under the collision peril
• All perils coverage provides for all types of losses except those that are specifically excluded
• automatic loss of use coverage
• coverage territory for automobile
• lineholder as joint loss payee

Endorsements for Automobile Damage

• loss adjuster must examine policy endorsement used to limit or broaden coverage under standard policy provisions
• loss of use endorsement entitles the insured to be reimbursed for reasonable amount incurred for transportation up to a certain limit whether or not the insured is at fault for an accident.
• limitation of amount endorsement provides a specific limit of coverage to what will be paid for the value of the insured automobile
• several types of waiver of depreciation endorsements sold across the country
• applies to partial loss and total loss
• coverage applies to partial losses as well as total losses
• civil liability for damage to non-owned automobiles endorsement extends coverage to the designated insured and his or her spouse in situations
• blanket basis fleet endorsement provides that all automobiles owned by the name insured during the term of the policy are insured without being identified specifically

Estoppel in Automobile Claims

• estoppel checked by non-waiver or reservation of rights

Absolute Liability for Third Parties

• automobile insurance contract is subject to terms and conditions just like any other contract except that it provides compulsory insurance to protect innocent third parties
• provincial insurance legislation includes an absolute liability provision that does not allow insurers to raise any defence against a third party that relates to an insured's contractual contraventions
• insurer would have the right to pursue recovery against the insured for any sums it is required to pay to a third party because of the absolute liability provisions

Misrepresentation or Material Change of Risk

• may be permitted to reduce the amount of insurance applicable or charge additional premium to reflect the risk undertaken

Criminal Charges and Consequences

• Under the federal Criminal Code it is a crime to make or use a false document with the intent it be acted on as genuine
• any false document submitted to the insurer would be a punishable offence
• loss or damage is not recoverable if the insured is convicted of an offence under the Criminal Code for causing death or bodily injury by criminal negligence

Discrepancy Between the Application and the Policy

Application for insurance forms part of the policy

• application will prevail unless the insurer, under a separate document, clearly pointed out the differences to the insured 

Canadian Automobile Theft Bureau

CATB, a part of IBC Investigative Services Division gets actively involved in recovery of stolen automobiles

• investigate auto theft and fire claims
• manages a database of stolen automobiles

Subrogation in Automobile Insurance

• insurer has right of subrogation upon payment of a claim
• when a liable uninsured motorist is known, the adjuster must protect the insurer's recovery potential
• insured automobile is in the hands of someone other than the insured, certain conditions apply to subrogation

Appraising Automobile Damage

• usually done by the insured's own insurance company
• various methods to establish the repair cost or value of the automobile

Appraisers

• professional appraiser usually assesses the damage, prepare a repair quotation, and then comes to an agreement with a repair shop on the cost of repairs
• appraiser's estimate is most commonly used method of arriving at an agreed repair cost

Appraisal Centres

• appraisal centres where an insured simply drives in for an appraisal
• once the appraisal is completed the insured takes the documentation to any repair garage

Direct Repair Programs

• direct repair programs do business on a regular basis
• repair facilities must meet certain minimum standards to qualify:
• having well-trained staff to deal with
• adequate office space
• capacity to do the number of jobs required
• negotiated labour rates
• advantage to the insured because he or she reports only to the repair facility
• in Toronto and other locations in Ontario, drivers must drive to designated collision centres

Garage Estimates

• estimates from repair garages are appropriate when damages are minor and the loss occurs in a remote area
• insured may be asked to provide comparative estimates

Notice of Automobile Loss

• must include the fullest information available to be effectively utilized by the loss adjuster
• year, make, serial number, point of impact, and description of the areas damaged must be included
• frequently asked questions by the insured:
• Will the deductible be applied to my claim?
• How much is it?
• Can I rent a care while mine is being repaired?
• Will I be reimbursed for a rental automobile?

Accident Investigation

• investigation must yield information to assess the claim
• investigation and damage appraisal must be adapted to respect the law of the accident location
• when a loss is not covered by the policy it is usually the adjuster who advises the insured of the reasons for the denial
• to document the file and make a plan for subsequent investigation, the policy contract coverage must be assessed
• photographs preserve road conditions and accident views
• automobile policy covers anyone who has the owner's permission to drive it
• reasonable expenses for towing and storage fees incurred in the interests of mitigating damages would be recoverable
• written statements from police could provide important factual details to assess liability on a case
• police testimony is credible

Temporary Substitute Vehicle

• insured's own policy may provide coverage
• agreement covers for the difference in the deductibles

Fault Determination

• underwriters need to know who is at fault for an accident in order to properly classify a risk
• loss adjusters must determine how much insureds are entitled to recover for damage on their automobiles
• most insurance companies have chosen to use inter-company "settlement" charts that permit an organized and predictable method
• check automobile and accident details against the information on the policy

Statements for Automobile Accidents

• fault chart is used to determine liability
• ordinary rules of law would apply to the claim
• statements for automobile claims follow the format for any typical statement
• record physical aspects of accident scene
• injury is identified it must be recorded
• recreate how the accident occurred

Witnesses

• loss adjuster contacts the insured and his or her passengers
• statements obtained as required under the circumstances
• usually drivers provide more useful statements about how the accident happened than does a passenger in the backseat
• in a tort environment, when loss is serious, the loss adjuster will search aggresively for independent witnesses

Using Experts in Automobile Claims

• loss adjuster must decide when it is appropriate to hire an expert
• case of recovery must be established and be properly documented as to its value
• a surveyor may be required to check the typography of the roadway
• a mechanic may be asked to report on the state of the automobile thereby establishing its value

Automobile Physical Damage Loss Settlements

• loss adjuster must have authority granted by the insurer in order to make an offer of settlement
• most insurers prefer an insured automobile to be repaired for the following reasons:
• safety of the automobile could be impaired by the failure to have the damage repaired immediately
• if the insured has another accident, overlapping damages could be paid for twice, increasing claim costs
• Psychologically, there is a tendency to exercise less case with a damaged automobile
• repair is considered to be a return to the pre-loss conditions

Automobile Total Loss

• when an automobile is not repairable and the loss adjuster must assess its worth, there are various methods to obtain an accurate market value
• when the cost of repairs exceeds the value of the automobile it is an obvious total loss
• some insurers have negotiated contracts with salvage buyers with preset formulas for determining the salvage amount the insurer will be paid

Ontario: Direct Compensation-Property Damage

• damage to insured's vehicle paid by own insurer
• no right of action against any person involved in the incident other than the insured's own insurer for physical automobile damage
• qualify under the DCPD
• fault determination rules apply
• collision coverage is still required for protection against at-fault or partially at fault crashes
• under DC the insured would be entitled to recover rental costs proportionately

Quebec: Direct Compensation Agreement

• intended to accelerate claims settlement and limit actions before the courts
• insurance act defines "public highway" as part of any land or structure which is intended for public automobile traffic except any part of any land or structure which is mainly used by the following automobiles, as defined by regulation:
• farm tractors, farm trailers, specialized equipment or drawn machinery; snowmobiles;
• automobiles intended for use off a public highway

DCA's Driver Fault Chart calls for certain issues to be ignored such as:

• actions of pedestrians
• speed
• weather conditions
• road conditions
• light, sound, or hand signals
• marked or unmarked road lines
• collision coverage in effect
• adjuster first indemnifies the insured under the collision coverage and then applies the DCA with respect to the deductible, loss of use and property carried by the insured

Sources of Compensation for Accidents in Quebec

Review the case study and the analysis in detail

British Columbia Automobile Claims

Review the case study in detail

Manitoba Automobile Claims

Review the case study in detail

Saskatchewan Automobile Claims

Review the case study in detail

Automobile Theft Loss

Detailed statements from the owner and the person last in possession of the automobile, if not the owner, should include information such as:

• who last had the automobile
• when and where it was last known to be
• details of all special equipment installed on the automobile
• any pre-existing mechanical or body damage

Adjuster can interview other family members or witnesses to confirm the information received

Deductible applicable to theft

Review the case study in text.

Automobile Fire Loss

• cause of the fire must be investigated and circumstances prior to the event
• physical condition and surrounding scene would require careful scrutiny by the adjuster
• examination of the automobile might indicate a fraudulent claim

Automobile fire investigation may include the following steps:

• obtain statement from owner and the person last in possession of the automobile
• interview fire fighters, police, tow truck driver, and any other witnesses
• report to claim to CATB
• hire an expert to determine cause if required
• check maintenance records of the automobile
• review insured's finances including any liens on the automobile
• determine whether the insured had other insurance losses
• determine whether the insured had other insurance losses
• check for any recent changes in the policy

Accident Diagrams Workshop

Before taking a statement it is useful to:

• rough out a drawing of the accident
• formulate appropriate questions
• on the diagram:
• the accident needs to be clearly identified showing the type of intersection
• identify the location of the accident
• indicate directions including compass directions
• do not identify a driver as insured or third party
• use a legend A to indicate the insured and automobile B to identify the other automobiles
• Review the diagrams in your textbook