Can insurer force salvage?
Published:Sunday | August 11, 2013 | 12:00 AM
Cedric Stephens, Contributor
Question: Can an insurance company force a claimant to take the salvage of a vehicle? Could this happen when the insured has no idea that the insurer had such a policy in the first place and did not sign any document relating to same? It was only after an accident and the insured requested copies of all the documents she had signed was she then given a document which she was seeing for the first time. The insured was not even given a policy schedule when she bought the policy. I would also like to know if the company is obligated to pay the maximum storage fee stipulated in the policy.
HELPLINE: The diagram that accompanies this article shows five steps that are commonly involved in buying a product or a service — like motor insurance.
In many of the articles that I have written over the years, those stages were captured in one word: homework.
There are hundreds of images like this one that are available on the Internet. Just type 'buying process' in your favourite search engine.
I chose this particular illustration for its simplicity. What I also like about it is that places responsibility for managing the process with the buyer, not the service provider. I hope that this chart will help to get my message to you and other readers more clearly and prevent surprises when bad stuff happens in future.
You are at stage number five of the process: the post-purchase evaluation phase. This part of the process, as invariably happens with insurance-buying decisions, was triggered by a claim.
Many of the problems that insurance consumers face daily occur during phase five. In many instances, these troubles can be traced to the avoidance of the information search and evaluation of alternatives phases or insufficient research and improper decision making.
Motor policies promise to indemnify the policyholder for loss or damage to the motor vehicle in certain specific situations.
The key word in that sentence is indemnify. In plain English, this means: pay, reimburse or compensate. The promise gets more specific. The contract details the methods by which claims will be settled. My policy, for example, says: "At our (the insurer's) option we may pay in cash the amount of loss or damage, or may repair, reinstate or replace the motor car or any part thereof or its accessories or spare parts."
There is nothing in the policy that gives my insurer the right to force me to accept the salvage in the event that my vehicle was declared a total loss in the event of a collision.
A vehicle is considered a total loss when the cost of repairs plus the salvage value meets or exceeds its pre-accident value. For example, if the estimate to repair a vehicle is J$650,000 and the pre-accident value is J$700,000 the vehicle would be declared a total loss, if the salvage value is J$50,000 or greater.
A constructive total loss for a vehicle means that the damage is so extensive that repairs would equal or surpass the pre-accident value of the vehicle.
Insurers are generally flexible in dealing with total or constructive total loss claims. In some cases, they will allow the claimant to retain the salvage and deduct its cost from the payment. In other instances, where the claimant does not wish to retain the salvage, the company will pay the pre-accident value of the vehicle, retain the salvage and sell it to interested persons.
Some persons buy vehicles that are declared total or constructive total losses from insurers on a regular basis. In other words, there is a market for wrecked vehicles that are offered for sale by insurers.
Like every other market, the prices are influenced by one of the laws of economics: supply and demand. The demand for some makes of vehicle are very low.
Cedric E. Stephens provides independent information and free advice about the management of risks and insurance. Email aegis@flowja.com. SMS/text message to 812-7233.