Cedric E. Stephens, Contributor
Question: Third-party motor insurance limits here are very low. I found out that most policies have 3/5/3 limits. They pay only $3 million for personal injury or the death of one person. The limit for a group of persons is $5 million. Property damage claims are limited to $3 million.
Accidents involving vehicles valued at $6 million are not uncommon. Repair costs, medical expenses and claims for personal injuries can easily exceed these amounts. Recently, five persons in one car died in an accident. The driver in the other vehicle was injured. Shouldn't the government protect citizens by imposing more reasonable limits under the law?
- dag@marblecraft.com.ky
Answer: The first version of The Motor Vehicles Insurance (Third-Party Risks) Act was written by our colonial masters. When it came into existence nearly 70 years ago, horses and buggies were still around.
Our local masters tinkered with the law after 1962. Notwithstanding the fact that many lawyers have occupied seats in the legislature since that time, the limits have always been very low.
Insurers and brokers also contribute to the problem of low limits. They sell 'comprehensive' policies. Buyers are not told that the law lays down minimum, not maximum, third-party liability limits; that the protection motor policies offer is not all-embracing.
Most consumers do not know that the typical policy limits can be topped up by paying an additional premium. As a former finance minister was fond of saying, this is not rocket science.
$20M COURT AWARD
The requirements for third-party liability insurance are set out in Section 5 of the act. Subsection (b) of paragraph (1) says: the policy must insure against "any liability incurred in respect of (i) the death of, or bodily injury to any person and (ii) any damage to property caused by or arising out of the use of the motor vehicle on the road."
The limits are prescribed in paragraph (2). These are: liability to any one person, a sum not less than $1 million; and a total liability of not less than $3 million arising out of all claims for any one accident.
The limits for property damage claims in paragraph (3) are a sum of not less than $500,000 for any one person, and total liability of not less than $1 million arising out of all claims in connection with any one accident.
Court awards for personal injuries can today run into tens of millions of dollars. I know of one case where $20.7 million was awarded in the case of the death of one man. Since multiple deaths are not uncommon, the total award could amount to over $100 million if five persons were to die.
SILLY LIMITS IN THE LAW
The price of a top-of-the-line SUV can easily exceed $10 million. The limits in the act, like the normal limits in policies on sale today - 3/5/3 in the example you used - are from another century.
Some may argue that where the liability limits in the policy are too low the victim can sue the vehicle owner/driver.
This is true only in theory. There is a backlog of cases in the courts. Only a few persons can find the money to settle a multimillion-dollar lawsuit. In practice, the chances of winning the jackpot in the lottery are probably much greater than collecting from the person who caused the accident when the policy liability limits are very low.
Justice is denied when the courts make an award and there is no cash or other assets available to pay the claim.
The act was designed to provide a safety net to the victims of motor vehicle accidents. It is not performing the functions it was set up to do. I hope that our present-day masters will rehabilitate it, as they say they plan to do with another legacy of colonialism - the railway system.
Cedric E. Stephens provides free, independent information and advice about risk and insurance. Email: aegis@cwjamaica.com.
