THE NEED FOR SCRUTINIZING POLICIES.
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Insurance Policies on Commercial Motors are Only Contracts of Indemnity. The Superiority to the Insured of "Valued Policies."
OOCCASIONAL references in the law courts to the difficulty in determining the extent of the damage recoverable under a policy of motor insurance in the event of a total loss by fire, collision or theft make one wonder if it is sufficiently realized that such policies, and indeed most policies of insurance other than life insurance, are only contracts of indemnity and not contracts to pay a fixed sum in the event of loss. Briefly, this means that the value of the vehicle at the date of loss must be considered as the damage sustained. An instance of this kind came before the law courts recently. A motor inured at Lloyd's for £500 against all risks was destroyed by fire. The defence put forward was that the car was set on fire by the plaintiff's instruction, but this defence failed. The judge described the story of one of the witnesses as fantastic and ridiculous, and he gave the verdict in favour of the plaintiff. The question of the amount of damage payable under the policy, however, was not very clear. He did not consider that the policy was a "valued" one and he held that £300 was a fair sum to award.
This report instances very clearly the difficulty to which I alluded—a difficulty brought about by condi;ions in the policy of insurance. There is a way out, however, and this will be shown later on.
Amongst the conditions of an insurance policy (which hardly anybody ever reads until a loss occurs) there is generally a "replacement" clause. This is sometimes on the back of the policy and, by reference, is made binding on the insured person, but is sometimes embodied in the text on the face of the policy. Wherever it is, however, it binds the insured most effectively. The wording is very similar in all policies; and I quote a typical clause, culled from the policy of a leading motor insurance company.
"In the event of loss of or damage to such vehicle, the corporation may at its own option repair, reinstate or replace such vehicle or part thereof or pay in cash the amount of the loss or damage."
The italicized portions of this clause are mine, and are so printed to emphasize my remarks ; they do not. appear in this manner in the actual policy. It follows, therefore, that if the company really wishes to do so, it can offer the owner of, say, a 1921 Ford " tanner " whose lorry has been totally destroyed a second-hand vehicle of the same date, costing probably £40, insfe.ad of paying in cash.
Naturally enough, perhaps, the average owner would at once object that, whilst it was true his vehicle was built in 1921, it was, nevertheless, in far better condition than the insurance company imagined, and was worth at least 290. He would also draw attention to the fact that he had paid his premiums for four or five years, and would add that he expected the company to pay the price of a new vehicle. This difference of opinion might or might not lead to the law courts, and so it behoves the owners of motor vehicles to take whatever steps are necessary to place them beyond the possibility of such disputes. I know one such owner who has done so very well. He is only in a small way of business, using a Ford " tonner ' for carrying his own goods from the docks to his business premises andthence to his customers' farms. This machine was purchased in 1921. For the purposes of his business some show is expected, and for his own convenience he has installed -several "gadgets " ; amongst his additions are a Ruckstell axle, disc wheels with aluminium plates, an aluminium bonnet and so on, whilst the coachwork is nicely varnished. Moreover, he seems to have been fortunate in securing an extraordinarily reliable machine, as his repairs throughout only amount to a few shillings. At a conservative estimate his lorry is worth £140.
The Way Out.
On the renewal premium for his motor insurance policy becoming due, he very wisely fills in the slip which his insurance company sends him, and the value thus declared is the value which the company are thereby bound to pay in the event of a total loss during the current year of insurance, an obligation forced on them by a legal decision of some years back, which is the leading case on the subject.
I would, therefore, strongly recommend the users of commercial vehicles to adopt this very wise plan and save themselves trouble and a possible bad five minutes in the event of a total loss. It 4 true that, with lorries, there is no financial saving on the premium to be effected in the majority of cases, since these vehicles have a standard rating of premiums, not altogether depending on the cost of the vehicle, thus differing from motors used for other purposes, where the insurance companies generally fix Premiums on horse-power and value combined. It is advisable, however, premium reduction or no premium reduction, to secure a " valued" policy.
The companies prefer the practice, and every responsible agent or broker would advise the adoption of this course by his clients.
As I have hinted, there is a saving in the case of private cars, or cars used for commercial and professional purposes. Such cars being rated on horsepower and value combined, it may well happen that a firm using a large number can save an appreciable sum annually by seeing that the insurance cover is such as represents the present value of the car insured, and not its value when new The recent reductions in the cost of such cars may even have led, in some cases, to insurances existing for sums greater than the cost of new models. The following is a typical example of the difference in rating, and it will show that a few minutes may advantageously be spent on overhauling insurance policies :—
Oar used for commercial purposes. Premium.
20 h.p., original value 2700 in 1921 ... £19 5 Same car, probable value £300 in 1925 ... 215 15
DIOGENES.