THE DEFINITIVE TRUCKING SITE

April 2008

INDUSTRY OBSERVATION

Sticky Warranty Claims

While people generally take out insurance to reduce risk and hassle, there are times when an insurance claim experience can turn into a mini horror show for the insured party. In some instances, the nightmare can extend to the insurer as well. 

Here is a case study that outlines the pitfalls and hazards of when it all goes wrong for the insured, the insurer and the broker.

Who is liable?

One recent example we had really left me bamboozled as to where the line in the sand should be drawn in terms of responsibility for the claim in question. 

Our client purchased a brand new six cubic-metre tipper. The first claim came in about six months ago. The tipper fell over, damaging the subframe and the tipper bin. We paid for the claim at the client’s choice of reputable repairer. 

A very short time thereafter the same tipper fell over in very much the same way as described in the first claim. This triggered a whole sequence of very difficult communications between the client, the broker and us. 

The client appeared to be carrying wet sand or a similar commodity but at no stage was the client questioned on this. We are currently settling this second claim. 

Getting tricky

At first the client wanted the vehicle written off, claiming that the vehicle was mechanically unsound and the tipper mechanism, including the bin, could not do the job. 

This was the first hurdle for us as the fall-over had not incurred anywhere near sufficient damage to write the vehicle off. 

The client stated that the repairs in the first claim had been inferior. It was now our responsibility to firstly, claim from the first repairer (i.e. as a warranty claim) and secondly, we were responsible for putting the client back in the position he was in before the claim (i.e. repair the second one). 

It is at this point that the client said that repairing the mechanism as per the first claim would be rejected because inevitably the tipper would fall over again and we would again have another claim. I think you can understand that it would be near impossible for us to determine whether (mechanically) this tipper mechanism was engineered correctly. 

Inevitably, it boiled down to the fact that we had to get an independent third party expert in to examine the mechanism, which, one thing leading to another, resulted in a quote for the entire sub-frame, tipping mechanism, hydraulics etc. being presented. 

We, the insurer, had to foot the bill but chose a bodybuilder we knew would definitely do the job correctly. I might add that this complete rebuild cost quote was a fraction of the cost of writing off the vehicle, thereby verifying our first decision. 

Even trickier

So to the really difficult part: We are confronted with the second (of the two claims) for the complete (new) rebuild of the client’s tipper mechanism. 

It was expected that we would pay the bill in its entirety notwithstanding that there would be substantial betterment of the vehicle in question.

In debating the whole affair with the broker and the client, I asked the client, “How come if you had found out even before the first claim that this mechanism was defective, you did not confront the agents?” 

He replied, “I have on numerous occasions, but have received no reply from them.” 

So there it was laid bare. We had been the first to respond to the problem and in order to resolve the issue once and for all, settled both claims.

The question arises: Are we are compensating for inferior workmanship on the part of the agents and picking up the bill for the mechanical rectification of a faulty system (the tipping frame)? 

We know that it is our job and duty to pay claims as quickly, professionally and competently as possible but just where in the sand should the line be drawn on this one?