Cedric Stephens | Motor insurance law shortchanging accident victims

QUESTION: The Jamaica Observer reported recently that the court awarded $36.2 million to a young woman. She is now 22 years old and was seriously injured in 2014 by a car. Brain damage, recurring headaches, seizures, blurry vision, loss of mobility of an arm and her legs were among the injuries she suffered. I am still very upset to learn that the insurance company will be paying her only $2 million. Where will the other $34 million come from? How could something like this happen? Can you explain?

- M.L. S, Portmore, St Catherine

INSURANCE HELPLINE: This story is unlikely to have a happy ending. If the report is true, the young woman is likely to get less than $1 million after she has paid the lawyer. Her attorney will not collect the other $34 million from the car driver who caused the accident.

My guess is that like most of us, the other driver does not have the funds to pay. The victim has expectations "of living comfortably" after the court award. This will not happen unless she is very, very lucky.

Chances are that she will end up destitute and become dependent on the state. This is because the compensation system of the Motor Vehicles Insurance (Third-Party Risks) Act, or MVITPRA, is dysfunctional. This is the cause of the impending tragedy.

An insurance industry source told me that in cases like these, where "we hit our policy limit" - $2 million for any one person for injury claims - the awards beyond the limits "are rare".

Statistically, this may be an accurate statement for the insurer.It is, however, cold comfort to the young woman. Locally, some 13,000 persons are injured in motor vehicle accidents each year.

Their total direct and indirect costs in 2014 amounted to $3.2 billion, excluding staff compensation, says a study conducted by McCartney, et al. Health Minister Christopher Tufton describes their impacts in stark, non-quantitative terms. Some of those injured may require "long-term rehabilitation ... be unable to return to formal employment due to permanent damage such as amputation or severe brain injury".

 

WHAT THE LAW SAYS

 

Section 5(2) of MVITPRA sets out the minimum monetary limits that motor policies must provide. It says that "in respect of death or bodily injury claims, the policy shall be required to cover liability to any one person for a sum of not less than one million dollars" and "the total liability of not less than three million dollars, in relation to each motor vehicle insured under the policy, arising out of all such claims".

The limits for claims for property damage in Subsection (3) are $500,000 any one person and $1 million any one accident.

Subsection (4) clarifies Subsection (2): "The policy shall not be required to cover (d) in respect of any death or bodily injury claims generally, liability for any sum in excess of three million dollars arising out of all such claims in connection with any one accident for each motor vehicle insured under the policy; (e) in respect of any damage to property, liability for any sum in excess of one million dollars arising out of all claims for such damage in connection with any one accident for each motor vehicle insured under the policy".

The law was passed during the first half of the last century. The limits are out of date. There is no link between them and the amounts that a court may award.

Courts follow well-established rules for pricing personal injury claims. Motor policies can provide limits for injury claims that are less than 6 per cent of actual court awards and still comply with the law.

This law is an ass! Because the limits are so low, accident victims are left to suck salt after a big court ward. Most drivers who cause accidents seldom have the funds or assets to pay the difference between what the court awards and the amounts that insurers pay.

The original lawmakers recognised the weakness in the legislation. They gave the minister authority under Subsection (6) to increase the limits with a minimum of fuss. Successive ministers have not exercised their authority to increase the limits. Why? It is anybody's guess.

Lawmakers in other Caribbean countries are more 'on the ball' on this subject than local legislators. Their laws, as shown in the table below, provide higher levels of compensation for victims of motor vehicle accidents than those in Jamaica:

Country Injury Limit Injury Limit Property Damage Limit:

Country One Person One Accident One Accident

Bahamas J$126.5 million J$379.4 million J$6.3 million

Barbados J$632.2 million J$1.9 billion J$3.2 million

Belize J$3.2 million J$12.7 million J$1.3 million

Cayman Islands J$154.2 million J$771 million J$38.6 million

Trinidad & Tobago J$18.6 million J$55.9 million J$9.3 million

Jamaica J$1.0 million J$3.0 million J$500,000

The values are expressed in Jamaican dollars for ease of comparison.

If motor insurers in other Caribbean countries have found ways to provide limits for personal injuries and property damage that are higher than those being offered in Jamaica, there ought to be no technical reasons why our insurers can't do the same.

The problems that this young person will face have gone too far to be solved by the present compensation system. However, similar cases in the future can be prevented by the stroke of a pen.

Updating the limits in MVITPRA would be an appropriate companion to the long overdue Road Traffic Act that is now before the Senate. Over to you, new Minister of Transport and Mining, Robert Montague.

- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com