Chp 5: Loss or Damage Coverages

Question 1

In which provinces is loss or damage coverage mandatory? and in which provinces is it optional?

Answer 1

Mandatory in Saskatchewan and Manitoba

Optional in British Columbia under government insurance plan

Question 2

How is this coverage offered in Ontario?

Answer 2

Coverage is offered under section 7- loss or damage coverages under the owners policy. Four subsections include:

a) specified perils
b) Comprehensive
c) Collision or Upset
d) All perils

Question 3

What is loss or damage coverages?

Answer 3

Indemnifies the insured for direct and accidental loss of or damage to the vehicle and its equipment, generally excludes anything that is not permanently attached to the vehicle, unless its specifically designed to be used with the vehicle

Question 4

What are the options available for insuring loss of or damage to the insureds automobile?

Answer 4

Specified perils
Comprehensive
Collision or Upset
All Perils (Not available in BC)

SCCA

Question 5

Specified Perils

Answer 5

This coverage specifies the perils or causes of loss the coverage insures against. Includes the following:

• Fire
• Lighting
• Theft or attempted theft
• Windstorm, hail or rising water
• Earthquake
• Explosion
• Riot or civil disturbance
• Falling or forced landing of aircraft
• Stranding, sinking, burning. derailment, or collision of any conveyance in or upon which a described vehicle is being carried

Exclusions include vandalism, glass breakage, impact with animals and malicious mischief

Question 6

Comprehensive

Answer 6

Comprehensive automobile coverage protects an insured automobile against all perils other than collision or upset. Perils covered include:

• Perils listed under specified perils
• Falling or flying objects
• Missiles (windshield chips caused by rocks)
• Vandalism

Question 7

Collision or Upset

Answer 7

This coverage indemnifies the insured for damage caused by collision with another vehicle, person, object, or the surface of the road, or by upset.

Usually sold in combination with comprehensive coverage

If the collision is with an animal, insurers will pay under comp coverage because it favours the insured as deductible is less than in collision or upset coverage.

Question 8

All perils

Answer 8

It is the broadest of the loss or damage coverages. Combines collision or upset coverage and comprehensive coverage.

Also covers certain types of thefts excluded under Comp, such as theft of automobile by person in insured household or by employee of insured

Question 9

What are the exclusions under loss or damage coverages? (7)

16 in total…

Answer 9

Autoplan optional policy states that no coverage will be provided for an:

• Vehicle being operated off a highway, unless it carries proper license
• Trailer being drawn by power other than vehicle or human power
• Remote control operated vehicle without a driver
• Aircraft, except when aircraft is drawn as a trailer
• Vehicle being used in contest, show or race, or in advanced performance driving (speed test, on closed tracks)
• Amphibious vehicle being used in or upon water
• Vehicle fitted with wheels of the crawler type while being operated off highway expect if vehicle is snowmobile, snow vehicle or licensed tractor.

*VTRAVAV

Question 10

What are the exclusions under loss or damage coverages? (9)

Continued…

Answer 10

Following losses are not covered unless they result from a peril that is covered, or they are caused by fire, theft, or vandalism:

• Type of damage associated with wear and tear or lack on maintenance of a vehicle (damage to tires or mechanical breakdown)
• Damage caused by theft of the vehicle by any person who is in lawful possession of vehicle (If person does not return a daily rental vehicle, rental company is not covered by theft)
• Damage caused by voluntary parting with title of ownership
• Damage directly or indirectly caused by contamination of radioactive material
• Damage to contents of trailer or to personal effects (Clothing, blankets, etc)
• Damage to a motor vehicle licensed and insured as a trailer, unless the vehicle is being operated as a trailer when damage occurs
• Damage to media and equipment for use with sound system installed in the vehicle when they are detached from the system
• Insurer is not responsible for any damage to insured automobile if insured operates it while under the influence of drugs or alcohol, or if insured lets another person drive the vehicle who is in a similar state
• Loss or damage to vehicle caused by theft of persons living in same dwelling as insured or by an employee (only covered in all perils form)

Question 11

What is a deductible?

Answer 11

Is an agreed specified amount that the insured must pay on a claim before the insurance company will cover the rest of the claim

Question 12

Deductibles under loss or damage coverages- how do they effect coverages and premiums?

Answer 12

Deductibles are useful tools in keeping down premium costs. Expenses for settling small claims are expensive to insurers and often exceed the amount of the loss itself. Deductibles are effective in reducing claims costs and losses under the deductible are paid by the insured.

This allows insurer to pass on cost savings in its premiums and encourages the insured to be more prevention conscious

Question 13

What is a standard deductible for collision and comprehensive coverage? and what happens when this deductible is increased or decreased?

Answer 13

Typically, a standard deductible for both collision and comprehensive coverage is $500.

Higher deductibles typically result in lower premiums
Lower deductibles typically result in higher premiums

Question 14

Describe a deductible under Direct compensation-property damage coverage (DCPD)

Answer 14

Under this coverage, a deductible may be selected, but it is optional.
If the claim is one to which DCPD apples, the deductible under this section will be the collision deductible multiplied by the percentage to which the insured is at fault for the accident. The amount paid under this section will not include the DCPD deductible that applies to the claim

Question 15

What are the additional benefits under loss or damage coverages? (4)

Answer 15

Additional benefits cover some related expenses that can arise as a result of an accident. The coverage includes the following:

• Payment of charges
• Forgoing right to recover
• Coverage for temporary substitute automobiles
• Coverage for loss of use due to theft

PFCC

Question 16

Payment of Charges (4)

Answer 16

Under this subsection, insurer agrees to pay certain additional charges that may arise:
General Average charges- Used in Marine insurance for a loss that is shared by interests such as the owner of the ship or owners of the cargo, etc. that arises from a voluntary sacrifice for benefit of all (Example: a part of the cargo may be jettisoned to save the ship and rest of the cargo from sinking. Loss will be shared by both owner of ship and owner of cargo.

Salvage charges- salvage is remaining value of property after severe damage by fire or other peril. When vehicle is damaged , stat conditions require insured to protect the vehicle from any further loss or damage, which could provide additional costs to insured. These costs would be covered by insurer

Fire department charges- policy will respond to fire department charge for their services

Canadian or US customs duties for which one is legally responsible as a result of insured peril- policy will respond to pay for customs duties levied when the automobile suffers a loss in the US

Question 17

Forgoing Right to Recover

Answer 17

If you give permission for someone to drive your automobile and a loss occurs, insurer forgoes the right to recover from that person. However they keep the right to recover payment in certain circumstances:

• When the person has the automobile in connection with a garage business
• When person using automobile violates and conditions of the policy or operates if for illegal use
• When the person breaches requirements of MVA regarding accident reports and the duties of the driver at an accident
• when the person willfully makes a false statement with respect to loss of or damage to the vehicle
• When the person has care, custody, or control of the vehicle under a bill of lading

Question 18

What is a Temporary Substitute Automobile?

Answer 18

Automobile not owned by the insured or anyone living in the same dwelling premises. It is a vehicle that replaces a described automobile after breakdown. theft, repair, servicing, sale, or destruction.

Question 19

Coverage for Temporary Substitute Automobiles

Answer 19

Autoplan provides coverage to named insured or anyone given permission to operate vehicle by named insured against liabilities imposed by law or assumed under any agreement, for damages to the temporary substitute vehicles.
If owner of TSA, has it insured against such losses, that policy will be primary and if the deductible is larger that the one of the insureds policy, the most the insurer will pay is the difference between the two deductibles

If the owner of the TSA does not carry physical damage coverage, and if loss occurs that is covered by insured policy, than there is coverage for damage to TSA.

Autoplan optional policy transfers the insureds own damage coverage to the TSA, regardless of whether the TSA has own damage coverage or not

Accident benefits also available for TSA if registered in BC

Question 20

Coverage for loss of use due to theft

Answer 20

Autoplan provides automatic coverage for replacement transportation if the described vehicle is stolen, and the insured has purchased all perils, comp or specified perils coverage

• Insured may use coverage to pay to rent a car or to pay for other reasonable expenses incurred for taxis or public transport.
• Period of reimbursement does not being until 72 hours after the police or the insurer has been notified
• Insurer will pay up to $40 a day or $800 total
• Coverage will continue until vehicle is replaced or repaired, or sooner if money is offered to settle claim

Question 21

What are the general terms and conditions under loss or damage coverages? (5)

Answer 21

Insureds must agree to comply with certain requirements, these include the following:

• General terms and conditions
• Temporary repairs to the vehicle
• ICBC’s right of recovery
• Right to settle claims for leased vehicles
• Own damage: Multiple insurers

GTIRO

Question 22

General terms and conditions

Answer 22

Apply to own damage coverage
ICBC is not liable to an owner of vehicle for loss or damage arising out of theft if the owner has not, without reasonable cause and to prejudice of ICBC:
-Reported the theft to police withing 48 hrs
-Obtained a police case file number for the report
-Advised ICBC, within 7 days of making the report to the police of the circumstances in which the theft, loss or damage occurred

ICBC is not liable to an insured if they fail to comply with requirements of MVA regarding accident reports and duties of a driver at an accident

ICBC is also not liable to an insured if they keep a vehicle at a location other than the one declared in the application to insurance

Question 23

Temporary repairs to the vehicle

Answer 23

Vehicle owner is not covered for temporary repairs made in order to move the vehicle under its own power to place where repairs are to be completed, unless owner obtains ICBC’s consent for temporary repairs

Question 24

ICBC’s right of recovery

Answer 24

ICBC waives right to recover from anyone who causes loss or damage to insured vehicle if they were given permission by insured unless that person:

• Breaches condition of this policy while having care, custody or control of vehicle
• Breaches requirements of MVA regarding accident reports and duty of driver at the accident
• Willfully makes a false statement about the loss or damage to vehicle
• Has care, custody and control of vehicle while engaged in business of garage service
• Has care, custody and control of vehicle under a bill of lading

Question 25

Right to settle claims for leased vehicles

Answer 25

ICBC may settle claims arising from operations of a vehicle leased or rented under a written agreement of more than one month directly with the owner and lessee of the vehicle.

ICBC may pay directly to lien-holder if owner fails to notify ICBC of loss.

This payment will be limited to the lesser of the following amounts:

• The declared value of the vehicle
• The actual cash value of the vehicle
• The value of the interest of the lien holder in the vehicle immediately before the loss or damage occurred.

Question 26

Own damage: Multiple Insurers

Answer 26

When an insured has coverage from one or more other insurers for loss or damage that is also covered by ICBC:

• The insured shall on the occurrence of loss or damage, promptly disclose to ICBC, the details of the other insurance
• ICBC will pay no more than:
• • where the policy limit of each insurer equals that of if ICBC, that share of loss that is proportionate to the total number of insurers providing coverage
• -where one or more insurers policy limits differ, that share of loss or damage, up to the limit of liability under the coverage having the lowest limit, that is proportionate to the total number of insurers providing coverage

Question 27

What is a phantom vehicle? and a paper collision?

Answer 27

phantom vehicle- A vehicle that does not exist or is already wrecked

paper collision- when parties conspire to create the illusion of a legitimate accident using either pre-damaged vehicles

Question 28

How do fraudulent claims arise from leased or phantom vehicles?

Answer 28

The ownership document for a vehicle is purchased and the non existent vehicle is registered. The new owner than reports the phantom vehicle stolen and submits a theft claim.

Recovered stolen vehicles that are heavily damaged and that are sold to salvors can be also involve fraud. Salvors sell vehicle registrations to people who obtain fraudulent safety inspections of the paper vehicle. Soon after, the car is reported stolen and claim is made on the policy

Question 29

Theft rings

Answer 29

Auto theft rings are highly sophisticated and creative. They may steal cars to use in staged collisions, to ship and resell overseas, or to obtain parts such as airbags for resale.

Leased luxury cars are sometimes stolen and shipped overseas where they are sold significantly over the manufacturer’s retail price. The lessee works with the criminal ring that “steals” the car and than also makes an insurance claim

Winning formula: 2 vehicles of same make, model, colour, and year were sought. One was stolen and the second was broker into and its VIN and registration were taken. The thieves manufactured VIN plates with valid numbers and were forged into stolen car which was sold to unsuspecting customers

Question 30

Staged Accidents

Answer 30

Staged accidents are typically organized by recruiters seeking to benefit from participants who pay a fee to be in on the fraud. Generally people who do these staged accidents focus on accident benefits frauds for injuries, but there are cases where fraudulent vehicle damage claims are made, such as claims seeking reimbursement for pre-existing damage or non existent vehicle equipment or accessories

Question 31

What are the tools used in Accident Reconstruction?

Answer 31

Main tool used that provides objective information about what happened is the airbag module. It can record up to two events such as vehicle speed, throttle position, engine RPM, seatbelt usage, and detailed acceleration data of the event itself. The airbag module info can be used to verify or refute witness information.

Physics of vehicle motion is also used to verify what witnesses say in their statements

Impact analysis, and crash damage research are also tools that can be used

Question 32

Arson

Answer 32

An alternate to making an unwanted vehicle disappear is to burn it. A severe fire may destroy evidence if poor maintenance or mechanical problems- a common motive for arson

Motor vehicle arson tends to occur at isolated locations and gasoline is the most common accelerant used in arson

Such isolated locations usually preserve footprints and tire tracks. If footprints match the insureds, it puts them at the scene of the fire. Such evidence against the insured could be incriminating.

Other clues may be visible in the vehicle itself (Fuel line, cap or plug was loosened or detached deliberately, key was left in ignition)

Question 33

Data analytics to combat automobile insurance fraud

Answer 33

Insurance industry’s use of data analytics is increasing. Insurance companies are working together to stop the spread of fraud.
The creation of CANATICS is a major initiative to this end

CANATICS is the Canadian national insurance crime services. Its a not for profit organization incorporated in February of 2013.