Insurance Helpline - With cedric Stephens

Question: I am the owner of a 2004 Toyota Probox station wagon. I bought it on March 10, 2008. Ten days later, the car met in an accident with a motor cycle that was not insured. I visited my insurers in Ocho Rios with the driver two days later to file a claim. I was unable to get any information about the rider of the motor cycle. He left the hospital before the police could speak with him. An investigator interviewed the driver and me in late May. On July 1, the company told me that they would not honour my claim. They said the vehicle was being used as an illegal taxi. The police report and driver's statement confirm that no passengers were in the vehicle. My car is in the garage with a $355,000 repair bill. The premium was paid in full. Can you help me to get justice?

- nic_27_ja@yahoo.com.

Answer: I have mixed feelings about your claim. The vehicle you bought appears to be in the process of becoming the 'car of choice' for taxi owners and operators. This brand seems to me to be slowly replacing the very popular, white Toyota Corolla and Nissan Sunny station wagon in the taxi business. Because of this and the fact that you have not strongly denied that your vehicle was not being operated as a taxi, my suspicions are that it was probably being used to transport passengers.

Morally, I believe that your insurers did you 'a dirty.' Like me, they are aware or should know about the trends on the roads. This is part of their business. They should know about the Probox as I do. They should have suspected that your car was being used as an illegal taxi. That, plus the details you provided in the application (proposal) form you completed, should have been strong clues about the use of the vehicle. If I am correct, that is to say, if the insurers suspected that your vehicle was being used as a taxi, I believe that they should have given you a warning before accepting the premium. The words of caution would not be dissimilar to those used by drug companies in their TV ads - for example, instead of saying "Do not take with alcohol, if you are pregnant or about to become pregnant," insurers would warn that "coverage will not apply if this vehicle is used as a public passenger vehicle" at the start of the contract. My insurance industry 'brethren' (and 'sistren') will criticise me about this view. I feel, however, that insurance law is moving in this direction.

insurer's contractual duty

What is the insurer's contractual - as opposed to moral - duty to you? This depends on a number of things. More precisely, the company's obligations to you should be consistent with its contract. How you described the nature of your trade/business and the use of the vehicle to the company is one factor. The purpose for which the vehicle was being used at the time of the collision is the other.

If, for example, you are the owner or operator of an illegal taxi, you use the vehicle in connection with that business and told your insurers otherwise, 'you are salt' - no ifs, buts or maybes. The company would have no legal duty to settle your claim. They could also justify non-payment of your claim even if no passengers were in the vehicle at the time of the accident. This is a feature of all motor-insurance contracts. Insurers insure taxis that have the 'red plates' and comply with all other aspects of the road-traffic regulations. Vehicles that operate outside of the law have no protection.

It would be a totally different story if you had told insurers the truth when you applied for the insurance. Provided that your trade/business was accurately stated and the vehicle was being used "in connection with that trade/business or for social, domestic and pleasure purposes", the insurers would have to pay your claim. If this was the case, your job would be to provide written proof to the company to show that the investigator made a mistake.

I read in another newspaper about a local company (Future Services International) that provides funding for persons who need legal services. Discuss your case with them. This assumes, of course, that my gut feelings are wrong; that your insurers are unfairly trying to avoid paying your claim because it occurred only 10 days after you bought the car.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. If you need free information or counsel to help you solve a problem write to The Financial Editor or contact Mr Stephens directly at aegis@cwjamaica.com.