Motor Insurance Flashcards
What is claim settling Agreements?
- Claims settling agreements are internal (or ‘market’) agreements between the insurers that are designed to minimise such conflicts.
They add to the overall cost of insurance cover and is clearly in the interests of all concerned to avoid them where possible. Claims settling agreements are internal (or ‘market’) agreements between insurers that are designed to minimise such conflicts
Knock for Knock Agreements
may be applied where there is a collision between two vehicles (or in some cases, an accident involving direct contact between two vehicles) which are covered by different insurers
- E.g. if motorist B negligently collides with motorist A, and both vehicles are damaged, each insurer will pay for the damage to its own clients vehicle.
- In this case A’s insurers will forego the rights of recovery (arising from principle of subrogation), which they have in law against B and his insurers.
If A refuses to make a claim under his own policy and insists on pursuing a third-party claim against B, which B’s insurers are obliged to settle, B’s insurers will be able to recover from A’s insurers the amount that A would have been able to claim under his own policy, so that the ultimate financial position remains the same. - Knock for knock agreements – operate only in respect of claims for damage to vehicles. If one of the drivers involved in a collision is injured any entitlement to compensation will still depends on their being able to establish fault on the part of the other (no-fault schemes excepted)
Insurers are entitled to reduce or remove a policyholder no claims discount whenever a claim is made, irrespective of the question of fault.
advantages of knock for knock agreements
prevents wasteful ‘dollar swapping’ by insurers
third party sharing
collision between two vehicles insured by different companies.
- e.g. two insurers will share the third-party claim equally (i.e. each will pay one-half of the damages recovered by the third party), regardless of the degree of fault attaching to each of the two drivers.
- The objective is to avoid any dispute between the insurers as to the relative blameworthiness of their respective clients.
- A ‘ceiling’ normally applies to such agreements (£25,000 is a common figure in the UK at the present time). So if the third party seeks a large sum by way of damages, which exceeds the ceiling, the insurers are not bound by the sharing agreement. Each insurer is then liable for a contribution corresponding to the degree of blame attaching to its insured client. If the whole of the blame rests with one driver only, that driver’s insurer will be liable for the whole loss and the other will pay nothing.
List the compensation for road traffic accidents: fault and no fault schemes?
- pure tort-based schemes
- tort- based schemes with limited no-fault benefits
- Blended schemes combining fault and no-fault benefits
- Pure no-fault road accident schemes
- Universal No-fault accident compensation shemes
Give me an example of an ‘add on’ no-fault schemes in the US states
Personal injury Protection (PIP) coverages - driver can add this to their auto insurance policies without limiting their right to sue in tort
PIP - explain what this Add on is?.
- allows the insured (and often people injured in the insured vehicle), to claim the cost of medical treatment and various other expenses from their own insurer
- no compensation to pain and suffering
Is an add on obligatory
Yes. ‘Add on’ purchase of this ‘no fault’ coverage is obligatory. Insurers are required to offer it.
No fault social insurance benefits: give examples
UK - NHS - free medical treatment for all injuries
- state sickness, injury benefits or even unemployment benefits
However, while these benefits are free at no cost to accident victims, they may still be funded, indirectly and in part, by motor insurers.
- It is very common for social insurers and public healthcare providers to have a right of recovery from the insurers of those who are involved in accidents i.e. road accidents
What is lifetime support scheme? (LLS)
- South Australia (SA)– has a conventional tort-based regime for road accident compensation.
- In 2013, lifetime support scheme (LLS) – was introduced in SA. – provides no-fault compensation for those who suffer catastrophic injuries in road accidents.
- LLS – does not provide compensation for non-economic losses – such as pain or suffering.
Threshold schemes
common form of compromise between tort-based and no-fault systems
problems of threshold schemes?
- defining threshold - the dividing lien between minor injuries (that are dealt with on a no-fault basis)
- raises moral hazard - those who have suffered minor injury can exaggerate in the extent of injuries to carry their claim across threshold and gain access to a tort claim and greater amounts of compensation
What are the two approaches to defining threshold
- Quantitative threshold - sets a specific monetary amount that must be spent on medical before the tort action is allowed.
- Qualitative verbal threshold - list and describes that are considered serious enough to allow a tort claim
New York state Claimants - can make a tort claim if they suffer significantly: disfigurement, a bone fracture, body organ or member, limitation of use of a body function or system, or substantially full disability for 90 days.
benefit of threshold schemes?
removes any incentives to inflate costs artificially in order to carry them over to the monetary threshold
- However seriously injured claimants may still be barred from a substantial compensation claim in tort if their injuries do not match the threshold definition.
What way can threshold be combined give me an example
- E.g. in the US state of Massachusetts - to bring a tort liability claim for a vehicle accident, the injured persons medical bills must amount to at least US$2,000 and or injuries suffered by the claimant must include permanent and serious disfigurement, fractured bone, or substantial loss of hearing or sight.
