Thu | Feb 20, 2020

Cedric Stephens | Why workplace injury court case may jack up motor premiums

Published:Sunday | January 19, 2020 | 12:46 AM
A stack of money.
A stack of money.

ADVISORY COLUMN: INSURANCE HELPLINE

Member of Parliament for St Catherine North-Western Robert Pickersgill argued very strongly last week for MPs to get more pay.

From my admittedly cynical reading of the Jamaica Observer article, the seven-term lawmaker carefully crafted his argument. Increased allocations to the constituency development fund formed part of the package for increased pay and benefits. By including the former, he was sure to get buy-in from some MPs.

Also, critics could not accuse him of looking out only for himself. Constituents across the island would also get more from the CDF. A win-win for everyone.

Whatever his motivation, Mr Pickersgill’s reported comments set the stage for today’s piece.

Legal writer Shena Stubbs-Gibson’s two-part article – A $600 million oversight: Janet Edwards v Jamaica Beverages Ltd – offered sound, objective and legal reasons for increases in compensation to a bigger group of citizens: mainly those with personal injury claims caused by negligence.

Some persons may argue that members of this group are more deserving than lawmakers. Also, the associated costs are likely to have a less direct impact on Government expenditure than if the MP’s wage demand was met.

Mrs Stubbs-Gibson’s two articles were about a local court award that she called “unprecedented”. It was bigger than the retained earnings of many companies. The award, she wrote, would “easily have exceeded the maximum sum insured of most companies’ public liability or general insurance policies”. Motor policies were omitted. They contributed nearly $21 billion, or 46 per cent, of the $46 billion non-life insurers collected in 2018. Other liability insurances were only four per cent. That court award is, therefore, more likely to affect motorists in the long term than other consumers. What are the reasons?

Motor policies must comply with the Motor Vehicles Insurance (Third-Party Risks) Act. Section 5(2) lists two minimum standards in relation to the compensation of third parties that those policies must meet. They are:

● Death or bodily injury claims – a sum of not less than $1 million any one person and $3 million any one accident; and

● Property damage claims – a sum of not less than $500,000 any one person and $1 million any one claim.

It is therefore not rare for victims of road accidents, especially, to end up ‘sucking salt’ despite insurance coverage in the face of sizeable court awards.

The Janet Edwards case speaks specifically to the need for adequate insurance coverage. Whereas a local court awarded $560 million to a claimant who suffered grave injuries in a work-related accident, the statutory limits in the Motor Vehicle Insurance (Third-Party Risks) Act, MVITPRA, are scandalously low.

Some motor policies have limits of between $5 million to $10 million for death or bodily injury claims and property damage claims. Others, depending on the insurer, offer the minimum. Often the buyer is clueless.

These amounts, having regard to the Janet Edwards award, offer little or no protection to motorists. The defendant, Jamaica Beverages, was forced into liquidation due to the size of the award. Its assets will be sold to pay the judgment since the company’s insurance did not provide a backstop.

Many years ago, another company also ceased operation following a multimillion-dollar award arising from a motor claim. Most private individuals would also face financial ruin in the event of a $25 million third-party claim.

This column has been advocating for increases in the MVITPRA limits on behalf of motor vehicle accident victims for many years. Unlike the MP from North-Western St Catherine, my motivation is not based on self-interest. It is simply the right thing to do. The existing limits shortchange accident victims, their families and dependents, and impose a social cost.

Robert Montague assumed responsibility for the Ministry of Transport over two years ago. In my column “Motor insurance law shortchanging accident victims”, I spoke directly to him. I quantified the social and economic impacts and offered arguments for increasing the limits under MVITPRA. The total direct and indirect costs of motor vehicle accidents in 2014 were put at $3.2 billion excluding staff compensation. Some 13,000 citizens are injured each year. The compensation system does not work effectively for most of them.

Data was also provided which showed that the limits in the Jamaican law were significantly less than those for the Bahamas, Barbados, Belize, Cayman Islands and Trinidad & Tobago.

The portfolio Minister is authorised by law to increase the limits without much fuss. Successive ministers, including the gentleman from North-Western St Catherine, have not done this or offered reasons for their inaction.

Are MPs deserving of a pay increase? If the performance of Messrs Pickersgill – who at one time held the transport portfolio – and Montague on this issue are representative of Members of Parliament generally, they should not get a pay rise. MPs and Government ministers should get paid based on their performance – not just because they have a soapbox in Gordon House to argue their case.

Also, the points that I have argued are more persuasive and beneficial to the society than those that were put forward last week.

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