How to Assess An Accident Claim
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WHILST I have written on the subject of accident claims before, in view of the interest now prevailing in this subject, it seems to me that it might be worth while m deal with it again.
For the benefit of those operators who may not have read MY previous articles. 1 will explain the difference between claiming for loss of profit and loss of earnings. It is insufficient to claim for only loss of profit, because that is not the only monetary loss which the operator may have to suffer as the result of an accident. He may also be at a loss' because he may have to incur expenditure as the owner of a vehicle that is not in use.
Whilst it should not be difficult to appreciate tiUs. the majority of operators overlook this aspect of the matter when they put in r a claim for compensation following an accident. It is probable that the mistake arises from the fact that, in insurance parlance, the term " loss of profits" is used when referring to a claim such as I have in mind. It is not only hauliers who make this mistake as the following true story, which I have told before, will show.
Convincing a Solicitor
An operator's vehicle which had been involved in an accident was off the road for a considerable time. He was making a claim for "loss of profits," and I was doing my best to persuade him to take the proper coarse and claim for " loss of earnings." I eventually reached the point of making him see the light, but he had difficulty in making his solicitor understand, and that had to be done because the case was going to court. In the end I agreed to go with him to the solicitor's office.
The solicitor, I found, was treating the term " loss of profit" literally, and when I 1-old him that his client would wish to claim reimbursement for a number of other items,. such as licence, insurance, garage rent, probably driver's wages, depreciation and overhead or establishment costs, he demurred strongly. In the end, however, he saw -my point of view, but this was only after I had cited a hypothetical case involving himself as the claimant.
Suppose you had a lire in your. office." I said; "one serious enough. to put it out of commission for a few weeks, but without causing you any material loss. I will assume that you arc able to rescue your books, files and furniture, but that the office is so damaged that you cannot use it.
" Because of the inconvenience attendant upon working in the office of a friend your earnings might drop from, shall I say, £50 to £20 per week, chiefly because your papers and the neeessary data requisite for conducting yout business .fre, for the period during which your office is inaccessible, not readily available. Would you claim only that difference in profit?", suppose so," he said. " Why? "
" Well," I explained, 7 you probably have -a clerk, a typist and an office boy: you will possibly continue to nay their wages notwithstanding that you are unable to make use of their services, just as you may probably have to continue to pay some proportion of the rent of your office although you cannot use it.
"Would you be agreeable to ignoring the fact that you have to continue those expenses, despite the fact that your own eat in additirin—and I emphasize this– ire reduced by i.:30 per week? ".
"I don't quite see what you mean," he. replied. . .
" Would you," I said, "be content if the insurance company paid you only your £30 loss of profit whilst you .bore the loss involved in the payment of the expenses -I have mentioned?" In the end he had to agree that he saw What 1 meant The Proper Procedure
The proper procedure when claiming for losses after an accident is as follows: First take from the books the. actual total revenue accruing from the use of the vehicle concerned during a period corresponding to that in which the vehicle was actually out of commission.. Suppose, for example, the accident put the vehicle off the road for six weeks ending July 2. 1.949, then the usual course is to refer to the six weeks ending July 2, or thereabouts, for 1948, taking the figures for earnings as applicable for this year. Deduct from the total any expenditure which would have been incurred had the vehicle been running, but which expense was saved because the vehicle was off the road. There will be savings in fuel, oil, tyres and in the customary maintenance.. The driver's wages might also be saved, but whether that be so or not will depend upon whether it was possible to employ the driver upon other work or not.
Perhaps I can best illustrate my point by an example. An accident occurs to a 6-ton. oil-engined vehicle, which, during the corresponding period in the previous year to that in which the accident occurred, was earning 145 per week.
should emphasize that it is necessary to produce actual figures for earnings during the previous period, together with proof that similar earnings would have been made during the time the vehicle was off the road.
This particular vehicle was covering 720 miles per week, being regularly engaged for six days a week making two out-and-home journeys per day and covering 30 miles each way.
From the operator's cost records I was able to ascertain that his vehicle was averaging 16 m.p.g., using Oil fuel at Is. 6d. per gallon, which works out at 1.13d. per mile. For lubricating oil he was .paying 5s. 6d. per gallon, and his average consumption was 600 m.p.g., equivalnt to 0.1Id. per mile. Tyres were giving him between 13,000 and 14,000 miles per set, and cost £85 per set. Taking 13,500 miles as being an average figure, I get 1.51d. pee mile for tyres. The average maintenance cost for thi., and similar vehicles over a like period averaged 1.25d. per mile, Assessing the Economies . Apart from wages, these four items represent economies accruing from the fact that the vehicle is not running, and they add up to 4d. per mile, which, on a .720-mile week, comes to £12 per week.
If, as I discovered, the operator was unable to find other work for his driver, then, in order to retain his services, he must pay at least" the standard wage for 44 hours, plus insurances, which amount in total to approximately £.5 16s. per week. While the man is engaged driving the vehicle 720 miles per week he is working 60 hours per week, and his wage, plus insurances, provision for holiday pay, etc., is £8 9s. per week, so that the operator saves £2 13.s. on that account. His total economy is thus E14 13s. pet--week, and his claim for loss di earnings is the difference between that and the £45-430 7s.
• We will now. find out the difference it would have made had he Claimed for only loss of profit. His weekly expenditure on the operation of his vehicle would be as follows: Licence, 14s.; wages, £8 9s.; rent, 10s.; insurance, it 5s.; interest on capital outlay, £1; depreciation, £3; establishment costs, £3. The total of &eel charges would, therefore, he £17 18s. Add to this E12 per week for rimning costs, and we get 129 18s. as the total weekly expenditure. If that be deducted from £45 we get the actual amount. Which is all that he could claim for loss of profit, namely, £15 2s.,compared with /30 7s., the amount which he claims for loss of earnings.
Two recent inquiries I have received started a new line of thought. Both correspondents were insistent that I should give them assessed figures for probable earnings and expenditure, and from that the probable amount representing loss of earnings.
In both cases 1 had to refuse, making the point that to do so would be a sheer waste of time, as they would ultimately have to produce figures of the kind I have outlined. More particularly, had I attempted to give the figures for which they asked there would have been trouble somewhere, especially as regards my estimate of profit. One of the inquiries related to a 7-ton oiler. The mileage covered and the hours worked were, to all intents, the same as in the example with which I have dealt.
The standing charges (including depreciation as being more convenient) could easily be assessed as follows: licence, £1 8s.; wages, 18 9s.; rent, 10s.; insurance, £1 5s.; interest, £1; depreciation, £5; and overheads, 1.5. The total is £22 12s. per week.
Taking average figures, the running costs 'would. be as follows: fuel, 1.55d.; lubricants., 0.18d.; tyres, 1.20d.; mainc16
tenance, 1.47d. The total is 4.40d. per mile. As the vehicle runs 720 miles per week, the total for running costs is £13 4s. Add the fixed charges, or £22 12s., and we get a total of £35 16s.
If I had agreed to do as these inquirers asked, l should, from the operating cost figures, have deduced the probable weekly earnings, and that is where I should most 'likely have gone astray, as I had no knowledge of the traffic being carried and would have had to fall back on my usual procedure and take 20 per cent, of the cost as being the net profit. That means that I should have added £7 4s. to the £35 16s. to get a figure for the weekly earning.
To get the amount of this claim I must deduct from the £43 the money saved as a result of the vehicle being off the road. Incidentally. I was informed in both cases that it was impracticable to find other work for the drivers.who were paid the net weekly' wage. In this particular example the savings comprised the running costs-413 4s.-plus the difference between the wages paid for 60 hours per week (£8 9s.) and the net standard wage (£5 16s.). The total saving was. therefore, £15 17s. per week, and the claim for loss of earnings £27 3s.
Danger of Guessing The vehicle might actually have been earning £60 per week so that my estimate would have been £17 short, and I rather think that if the operator had put in a claim on the basis of -iny figures and subsequently found that he could have asked for and got a further £17, he would have been rather peevish about it.
The other inquiry concerned the operation of a 7-tonne' and trailer: Again it was an oil-enginecl vehicle.
In this case' the fixed costs comprised: licence, £1 I6s.; driver's wages, £8 9s4 mate, £5; rent, 15s.: .insurance, £1 10s.: interest; £1 6s.: depreciation, £6; establishment costs, £7. The total is £31 16s.
The running costs will be: for fool, 2.28d.; lubricants, 0.27d.; tyres, 1.60d.; maintenance. 1.85d.. The total is 5.90d. per mile. For 600 miles -per week t6. figure is 114 15s., so that the total cost of Operatidn is £46 I Is,
If I have to assess profits on that, I take my usual future of 20 per cent., which, for convenience, I shall call.
£9 95., so that I obtain a figure for total earnings of £56. From that 1 dm to deduct my four items of running costs,
£14 15s., and the dleretice in wages as between a driver and mate working -60 hours per week and receiving £13 9s., and the same two working only the 44-hour week and receiving £.9 12s. -per week between them. That difference is £3 75., so that the total savings amount to £18 12s. If deduct that from the gross earnings of £56, I get £37 8s. as being the amount of the claim.
Here, again, I am just as likely to be wrong in my estimate of earnings as in,the other case, and therefore I must insist that the onerator uses his own ligUres'for.hiS total earnings even if he has, to some extent, to Use estimated figures for his costs.