Insurance regarding motor vehicle accidents

Contributed by ChristianFoyle and current to 27 July 2018

There are four different types of insurance policies for motor vehicles.

1. Compulsory Third Party – this is a compulsory insurance that is paid at the time a person registers a motor vehicle. The cover by that policy only extends to claims against the person as the owner or driver of the vehicle by other persons claiming damages for personal injuries. The only body who administers this insurance is the Insurance Commission of Western Australia;
2. Motor Vehicle Catastrophic Injuries Support Scheme – This is a recent innovation by the Western Australian government. You must have a catastrophic injury as a result of a motor vehicle crash in WA on or after 1 July 2016. Catastrophic injuries include spinal cord injuries, traumatic brain injuries, multiple amputations, severe burns and permanent traumatic blindness, in line with the Motor Vehicle (Catastrophic Injuries) Act 2016.
3. Comprehensive vehicle insurance – this type of policy covers claims for property damage and incidental loss flowing from property loss. It covers both claims brought against the insured as well as damage to the insured’s own property arising out of an accident. Most insurance companies offer this type of insurance;
4. Third party property insurance – this type of policy only covers claims brought against the insured by other persons for damage to their property and loss flowing from an accident. It is usually taken out by owners who consider that the vehicle they are driving is not sufficiently valuable to insure comprehensively or who feel that they are unable to afford comprehensive insurance. This insurance can be arranged at a relatively low premium cost, depending upon the age and history of the driver. It is advisable to contact a number of different insurance companies to obtain quotes for the cost of this insurance. Most insurance companies offer this type of insurance.

Losing the right to claim on the insurance policy

When an insurance policy is taken out on a motor vehicle it is advisable to read the terms of the policy carefully. Most comprehensive and third party property policies contain special conditions binding the owner of the vehicle, and failure to comply with them in certain circumstances can result in the insurance company refusing to accept the claim. Some common problems are:

Failing to report the accident

Most policies require the insured to report any accident or damage as soon as possible after the accident has occurred and the damage sustained. Even if the owner does not intend to make a claim on the insurance company, it is still advisable to notify the insurance company of the incident, indicating that the notice is not a claim.

Alcohol

Most policies also stipulate that no cover will be provided if, at the time of the accident, the vehicle was being driven by a person under “under the influence of any alcohol or drug" or under the influence of a drug or intoxicating liquor exceeding a prescribed blood alcohol level.

Unlicensed driver

Most policies provide that the insurer can refuse to cover a claim if the vehicle, at the time of the accident, was being driven by a person who did not hold a current licence that was valid for the vehicle. This includes a person to whom the owner has loaned the car. Someone lending their car should always check that the other person has a current driver’s licence. This will protect the owner, the driver, and anyone suffering damage in an accident involving the owner’s vehicle.

False or incomplete particulars

At the time when a person arranges insurance, they should make sure that all questions asked by the insurance company on the proposal form have been truthfully answered. Questions are asked about the owner’s past driving record and there is an obligation on the owner to truthfully and fully disclose all factors relevant to the risk to be insured and to the insured’s past driving history. If the owner does not do so, the insurance company may refuse to honour a claim. If the owner’s claim is refused, he or she should get legal advice as to whether the insurer was justified in refusing the claim.

A common argument that often appears in life insurance policies is that the insurance company would not have agreed to insure the insured person if certain facts had been correctly disclosed. One common particular that results in several insurers refusing to grant insurance is where the insured person has written off a vehicle within the 5 years prior to the initiation of the policy.

Comprehensive insurance

If a person’s vehicle is covered by a comprehensive insurance policy, the following factors must be considered in deciding whether to make a claim on the insurance policy:

• the duty to report the accident under the policy (see above);
• the excess applicable to the policy;
• whether the policy provides coverage (e.g. regarding theft, some policies cover the damage to the car but not the items stolen); and
• the amount of the no claim bonus.
• if the other party is at fault, are they insured, or do they have sufficient assets to meet the cost of the repairs;
• if legal proceedings are commenced, what are the likely legal costs and who will cover those legal costs, many insurance policies will have a separate section that deals with legal defence costs (legal costs are generally easier to obtain from a sophisticated litigant such as an insurer);
• who was negligent and what is the likely apportionment of liability; and
• the amount of damage to each vehicle.

Excess on a policy

The excess is an amount stated in an insurance policy to be the amount payable by the insured when making a claim on the policy. The excess can vary depending on the insurance company, the age of the driver and the insured’s driving history. The usual situation is that insurance companies insist in motor vehicle policies that where a claim is made on a policy and, at the time of the accident, the vehicle was driven by a person under the age of 21 years or between 21 and 25, then a special age excess will be applied over and above the normal excess on the policy.

No claim bonus

In calculating the amount of insurance premium, the insured person will pay each year on a comprehensive policy, companies have adopted a general principal of rewarding owners of vehicles who have not made claims on their policy during the year of the insurance.

Where there has been no claim, the company will normally, at the renewal of the premium, adjust the rate so that the insured receives a discount. Conversely, if the insured has made a claim throughout that year, then the premium will usually be increased as a result. Different insurers have different rules in this regard and it is often the case that if the insured is involved in a not at fault car accident then the no claim bonus will not be altered adversely to the insured.

In these circumstances, the insurance company will normally seek to recover all or part of the insured person’s excess from the other driver together with the amount paid by the insurer.

It is therefore advisable before making a claim on a policy to ascertain what effect the claim will have on the no-claim bonus. The no-claim bonus is generally worked out as a percentage of the standard premium. Different insurers apply different percentages of no-claim bonuses.

If an insured person makes a claim on their insurance policy, the insurance company can commence an action against the other driver in the insured person’s name. This is called subrogation. In such a case the insured person’s insurance company will pay all of the legal costs of the action. Actions by subrogation are common. An insured person may be called as a witness if the matter gets to the stage of a hearing.

Complaints about insurance companies

If you are not happy about the way in which your insurance company has handled your claim, you may complain to the Financial Ombudsman Service (FOS).