Deductible issues

What is the right liability deductible for your cranes and transport vehicles? Many crane, rigging, heavy haul and transport companies have liability deductibles that can range anywhere from $10,000 to $25,000. This creates some complicated scenarios when what appears to be a minor property damage or bodily injury loss occurs.

Take for example the case of XYZ Crane that was working at a jobsite in a residential area setting trusses. The operator is flying a truss when the rigging breaks, and the truss falls onto a willow tree. The contractor for which the crane company is working told the operator not to worry about it, that they will take care of the damage. After all, it is a willow tree. How much can that really cost to replace?

Months later, the contractor has not taken care of the damage, and a lawsuit is filed against XYZ Crane, asserting more than $12,000 in damages for the replacement of the tree. The crane company, who believed that that the general contractor had picked up the tab for the damage, never submitted a claim to its carrier.

Another variation could occur with a simple road hazard liability claim. A crane or a heavy hauler is involved in a minor fender-bender with a car, and the company's driver is at fault. The car that is hit sustains only minor damage, and at the accident scene, the driver of the car said that no one in the car was injured. The company, thinking that the loss is below their deductible, offers to pay for the damage to the vehicle. A couple weeks or months later, the driver of the car gets an attorney and presents damages in the amount of $20,000 for soft tissue injuries and $5,000 for the car damage.

The question then becomes this: What is the best protocol to follow when losses like these occur? Prompt notice to your insurance carrier is crucial, even if the property damage or bodily injury alleged is below the deductible. Giving notice serves many purposes. First, it takes away an insurance company's ability to assert late notice of a claim as a policy defense to a later filed lawsuit. In addition, the prompt notice will allow the insurer to determine if any investigation into the loss is needed. Also, if the insurer is notified before the company makes a payout, it will be unable to assert voluntary payment as a defense to coverage. Lastly, if it is determined that the insured wants to pay for the claim out of pocket, he can have the assistance of the carrier or claims adjuster in getting both property damage and bodily injury releases either at the scene of the accident or close in time afterward. Often times, when a company makes a payment on a claim that is below the deductible, this step of getting releases is not taken, which can open the insured up to additional liability.

While some companies would rather pay low value claims themselves, others will always submit the claims to their carriers. The claims adjuster then pays the claim (whether it is above or below the deductible) and then looks to the insured for reimbursement of the deductible. Sometimes, this process runs very smoothly, but often times, it takes a lot of effort to get an insured to part with their money. If an insured does not pay its deductible, it is possible that a legal battle will ensue.

One of the reasons an insured may refuse to pay its deductible is on the basis that the insured was not liable for the loss, or there is no coverage under the policy for the alleged loss. This raises the issue of the insurer's ability to settle claims when the insured does not believe he is at fault for the loss. For example, in Boral Industries versus Continental Casualty Co., an insurer settled a claim below the insured's deductible, and sought reimbursement from the insured for the payment. The company contended that there was no coverage under its insurance policy for the loss and the carrier settled in bad faith, relieving the company of having to pay its deductible.

Typically, claims for bad faith against an insurance company result from failing to settle a claim within the policy limits, so when a suit results, the court has to take an entirely different approach. The court in Boral noted that the insurance policy contained an unencumbered right to settle claims, such that the insured was on the hook for the deductible. The court also stated that since the insured was a corporate entity, it had the ability to negotiate with the carrier on the settlement provision in the policy. Most policies do contain a provision that allows the carrier to settle claims despite what the insured views as lack of liability or lack of coverage, and, as this court noted, when this happens the insured must still pay its deductible. Of course, a carrier or claims adjuster's good business sense should indicate that they should keep the insured in the loop regarding the possible settlement of any claim, however, that does not necessarily mean that the insured's consent is needed to settle a claim.

However, all these problems can be avoided if you are able to develop a good working relationship with your insurance carrier and with their claims adjusters. For example, an accident occurs as XYZ Crane is driving to a jobsite. A car rear-ends the crane at a stoplight after failing to brake. The car asserts that the crane stopped too fast. The driver of the car claims soft tissue injuries and damage to their car in the amount of $8,000. In this scenario, XYZ Crane is faced with a few options, some of which are better than others. First, it can recognize its lack of liability for the accident and refuse to pay a claim and refuse to alert its carrier, which is not the best option, considering the litigious nature of our society. The driver will most certainly bring suit against XYZ Crane. The next option is for XYZ Crane to pay the damage out of pocket, as it is below the deductible. Again, this may not be the best option, especially when there is very questionable liability. In addition, if XYZ Crane pays without getting a release from the driver of the car, more problems can result for XYZ Crane, such as the driver attempting to sue for more money on down the road.

The best option in this scenario would be to contact your insurance carrier immediately, who will be able to solidify liability defenses from a scene investigation, and if they are qualified, will recognize that the claim is not one that should be paid. Many typical claims adjusters will be willing to pay a claim of this sort, just to get it off of their desk. Therefore, it is important that you stress to them your position, and this open communication may bring the issue to a mutually beneficial resolution.

In the insurance world, it is not only important to have a company that will pay the claims that need to be paid, but also will not pay the claims that should not be paid. Also, qualified claims adjusters will recognize that when a claim comes in that is below deductible, there is still a need for their assistance. A qualified claims adjuster will not just refer the claim back to the insured for them to deal with because it is below the deductible. He will become actively involved in assisting the insured in any way possible, even if the insured decides to pay the claim himself. A qualified claims handler will also recognize the need for a coverage opinion in the event that there is questionable coverage; he will not just pay the loss.

While money is the bottom line when it comes to insurance, claims handling affects this bottom line. Your company should only pay for claims it is liable for, and teaming up with a carrier that understands that is important. Otherwise, insult can be added to injury by your company having to pay a deductible for the settlement of a claim by your carrier that should not have been settled in the first place.