PART E - DUTIES AFTER AN ACCIDENT OR LOSS

Up to this point, the PAP has been concerned primarily with the duties of the company. This section explains what an insured must do in order to fulfill his obligations once a loss occurs. It is important that these conditions be met, since failing to comply may relieve an insurer from having to pay for a loss.

'05 Change: The wording of this provision has been changed. The insured still risks endangering his or her coverage by failing to comply with their post-loss duties. However, the provision now states that coverage may be lost only if the failure harms or violates (prejudices) the insurer's position. In other words, the provision no longer permits a loss of protection for a mere technicality.

Example: The Smiths are insured under a PAP and have been sued by a driver due to an intersection accident. The Smiths call their insurer to tell them that they received some important paperwork. The insurer asks the Smiths to send the paperwork and that it would be good if they mailed it within a week. The Smiths mail the paperwork 21 days later. The insurer later sends a letter saying they will not defend against the claim because the “late” mailing was a breach of the policy’s cooperation requirement.

Scenario One – the policy was written on a pre-2005 edition of the PAP. In this case, there is a possibility that the delay may result in a loss of coverage.

Scenario Two - the policy was written on a 2005 edition of the PAP. In this case, the insurer would have to have compelling proof that the slight delay harmed their ability to investigate/handle the loss before being able to withdraw/deny coverage.

A. Notification. The insured must tell the company the accident details as soon as possible. The notification may be to an agent, and, ideally, should include the identity and addresses of any people hurt in the accident, as well as accident witnesses.

Item A is critical, since it initiates the entire claims process, and it gives the insurer its first and best opportunity to control the expense of the claim.

B. If an insured wants coverage, he/she must:

1. assist the insurer in the claim’s investigation and settlement, as well as help with defending against any claim or suit.

2. immediately send the company copies of ANY material received that’s related to the accident.

3. agree to attend as many:

a. physical exams, involving doctors selected by the insurer and/or

b. interviews under oath as are reasonably requested by the insurer. These requirements are at the insurer’s expense.

4. Permit the insurer complete access to medical and other records that relate to the accident.

5. give the insurer any requested proof of loss.

The conditions under item B allow an insurer to evaluate whether a loss payment is due and how much has to be paid. This area has a lot of potential for straining relations between the insurer and the insured, since the two parties may differ over what is “reasonable.” The insured may quickly become concerned with their privacy, as well as their community standing. It is important that this provision spells out an insured’s contractual obligations in order to document their cooperation and possibly mitigate any hard feelings over repeated requests for help or information. For an illustration of the importance of an insured’s attitude in assisting an insurer, please refer to PF&M Section 410_C066, Insured Fails To Cooperate, in Court Cases.

C. If the loss involves uninsured motorists coverage, the insured is further obligated to notify the police quickly if the accident was caused by a hit-and-run driver, and to send the insurer copies of any legal papers should a suit be filed. Hit-and-run losses are always difficult to investigate and are always favorites for exaggerated, inaccurate or fraudulent claims. The requirement that such losses be immediately reported to the police is a way to guard against claim problems.

D. If the loss involves collision or other than collision coverage, the insured is further obligated to:

1. protect their property from further loss. The company is obligated to reimburse the insured if any additional expense is involved.

2. quickly notify the police if the covered vehicle is stolen.

3. allow the company to inspect and evaluate the damage property BEFORE it is repaired or removed.

Preserving the damaged property after a loss is extremely important.

Example: Tina returns home early in the morning in her convertible and hits a very large landscape rock that’s in front of her house. The damage is minor, but it includes damage to a mechanism that made it impossible to close the convertible top. Instead of moving the car into the garage or covering the car, it’s left in the driveway. Tina’s car remains outside, sitting exposed to a downpour that severely damages the interior and the car’s electrical systems. This situation creates a need to tow the car to have the damage inspected (when, originally, it could have been driven), and it complicates the adjustment and settlement.

In the last instance, having any damage repaired or getting rid of the damaged property is an extremely serious breach of contract on the part of the insured, and could easily result in an insurer’s refusal to make payment. If the insured vehicle is repaired or disposed of, the insurer has no chance to evaluate whether coverage was due, nor determine how much was due.

Example: Jeremy’s older car has a significant number of body dents, scratches, etc., but still has collision and other than collision coverage. On the way to work, he rear-ends another car. The damage to his own car is restricted to his bumper and right front end. However, Jeremy takes the car to a garage and has the accident damage repaired, as well as having all of the body dents removed and the vehicle repainted. He then reports the loss, submitting the total repair bill to his insurer. This late reporting complicates the third-party situation, since there is a delay in contacting the owner of the car that Jeremy hit. Further, it’s now impossible to determine what, if anything, was due to be paid to Jeremy.