Auto policy Contracts: What you ought to Know

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Auto policy Contracts: What you ought to Know

Here is more information on policy contracts that each collision repairer must know to raised serve their customers and avoid any unnecessary liability.

Last month, I explained the difference between first-party auto claims and third-party auto claims. This month, I’m getting to offer more information on policy contracts that each collision repairer must know to raised serve their customers and avoid any unnecessary liability.

Insurance Contract

As noted in last month’s article, an insurance contract provides protection against damages which will occur. A contract of insurance or “policy contract” is essentially an agreement between two parties creating legal obligation/duties for both. Each party is legally and contractually sure to perform the required duties (as outlined within the policy contract), like rendering a payment or delivering goods and services.

In order for the contract to be enforceable, each party must exchange something useful (“valuable consideration”), like the named insured paying their premiums on time in exchange for continued coverage and peace-of-mind regarding the advantages (economic and asset protection) owed within the event of a covered loss.

Generally, an insurance policy/contract is understood as an “adhesion contract,” where the insurer determines the policy language (promises, duties and exclusions) and therefore the consumer either purchases it as written or not. There are not any negotiations on the terms of the policy. the sole modifications are going to be the addition of excluded drivers, sorts of coverage like rental, optional accessories, the bounds (levels) of coverage chosen and provided for, and therefore the sorts of coverage also as those declined. These definitions, positions and mandates vary by state.
Types of Coverage

Some common sorts of coverage found in personal auto policies include:

 Collision: Damage to the insured vehicle(s) involving an impression with another object.
 Comprehensive: Pays for damage to your vehicle caused by covered events like theft, vandalism, fire, flood, wind, hail, hitting an animal and other events considered “acts of God,” which aren't collision-related. Note that ought to an animal jump ahead of you and you swerve to avoid it and, as a result, strike a tree, the claim would likely fall into the collision portion of your policy.
 Auto liability coverage: Covers damages (property damage and bodily injury) to 3rd parties arising from the insured or their authorized driver’s negligence.
 Uninsured and underinsured motorist coverage: Uninsured motorist coverage protects you if you’re in an accident with an at-fault driver who doesn’t carry insurance (to buy your damages and/or injury). Underinsured motorist coverage, on the opposite hand, steps in when you’re in an accident with an at-fault driver whose liability limits are too low to hide the damage or medical expenses.

Depending on the state, a number of these coverages are mandatory, some could also be optional and a few might not be applicable.
Breach of Contract

Failure by either party to satisfy their contractual obligations to the opposite could end in a claim for a “breach of contract” or other applicable activities which can , through a legal course of action, be determined to be a tort . An example would be deceptive trade practices, which can apply to any business, including both insurers and collision repairers who are found guilty of such practices that harm or take unfair advantage of consumers.

Breach occurs when a celebration to a contract fails to satisfy its obligation(s) as described within the contract, or communicates an intent to fail the requirement or otherwise appears to not be ready to perform its obligation under the contract.

Unfair trade practices include misrepresentation, false advertising or representation of an honest or service, tied selling, false free prize or gift offers, deceptive pricing and noncompliance with manufacturing standards.
Bodily Injury/Property Damage

The most common sort of third-party insurance claims are often mentioned as a “bodily injury (BI)” or “property damage” (PD) claim. for instance , if through your negligence you cause an accident and damage another’s property (i.e. vehicle) and/or cause personal injury to others, the casualty can file a claim against you for his or her damages. If you've got the coverage available to you, you'll then seek protection from your own insurance firm and demand that they step in and resolve the claim to guard your financial assets and liabilities up to the financial limits of your auto liability coverage.

Should your insurer fail to completely resolve the third-party claimant’s damages, the third-party claimant can seek recovery of their damages directly from you or the at-fault driver and, if needed, bring a lawsuit against you for the recovery of their damages. After all, their damages were caused thanks to your negligence, not that of your insurer.

You would then call upon your insurer to guard you as promised in your policy contract. If they fail and a judgment is levied against you for the victim’s damages, you'll then have a explanation for action against your insurer for failing in their duty to guard you and placing you in harm’s way.

It’s important to notice that while the first-party claimant (policyholder) may have specific dollar limits of coverage within their policy contract, the third-party claimant (victim) isn't bound by the policy contract or its limitations and is entitled to the complete recovery/reimbursement of their losses.

Should the third-party claimant’s damages exceed and exhaust the negligent policyholder’s limits of obtainable liability coverage, and therefore the insurer has provided payment of the bounds under the terms of the policy contract, the third-party claimant can then turn their attention to the at-fault party and seek recovery of any and every one remaining unpaid amounts due them until indemnified (made whole).
First-Party Claims

First-party claims are made by the insured policyholder (aka first-party claimant) against their own insurer. this might be under their collision or comprehensive coverage for the repair or replacement of their vehicle thanks to damages incurred during a covered loss. this might include rental car coverage during the repair of their covered vehicle (if they need such coverage available to them in their policy contract).

If their insurer fails to resolve a claim during a proper, equitable and timely manner (as mandated in most states), the policyholder may seek compensation for his or her damages by filing a civil lawsuit against their insurer for breach of contract and/or failure to act in straightness (aka “acting in bad faith,” “bad faith conduct,” etc.) and/or deceptive trade practices, etc.

Examples of such behavior are:

 Failing to perform their obligations under the accept whole or partially
 Failing to perform a correct and thorough investigation of the claim
 Delaying or denying a claim and compensation without a justifiable reason
 Failing to acknowledge and reply to a claim promptly
 Attempting to settle a claim for fewer than is fairly necessary to indemnify the policyholder
 Using misleading and misinformation to deny claim payments
 Failing to tell the insured of an appeals process
 Requiring unnecessarily burdensome documentation to process a claim
 Using investigative methods to harass and intimidate the claimant
 If the insurance firm misinterprets the contract

There are many other ways during which an insurer may act in bad faith to avoid paying out fair consideration. Oftentimes, when found guilty of such conduct, the courts will pass on stiff financial penalties (punitive damages) and sanctions to the offending insurer to send a message and warning to the auto/casualty insurance industry that such behavior won't be tolerated.

In an Auto Damage Experts (ADE) poster provided to our repairer coaching/consulting clients, it states in part:

“When an insurer representative fails to completely ascertain the complete extent of all loss-related damages, and/or fails to supply proper consideration for every necessary process, part and/or material, the failure are often defined as either: ignorance, gross incompetence or intentional misrepresentation (or a mixture thereof).”

As one can see, during a first- or third-party claim, any of the aforementioned events might be found to be a breach of contract or failure to act in straightness by the insurer.

It’s important for all to understand that insurance claims people and collision repair professionals are placed during a position of charitable trust , and therefore the unwary consumer often relies upon expert professionals to try to to the proper thing and protect them in their time of need.

The medical community has the Hippocratic oath , where a replacement physician swears to uphold longstanding professional ethical standards and to “do no harm.” This pledge also strongly binds the scholar to his teacher and therefore the greater community of physicians with responsibilities almost like that of a loved one .

The collision industry would had best to develop an identical oath and abide by it when serving their industry and their one and only true customer: the vehicle owners and their families.
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