IFSO Case Study

In September 2006, through the broker, a company arranged cover for a refrigeration truck. 

In or about September 2009, the company’s director had a telephone discussion with the broker, about adding an endorsement to the policy. 

He believed he had said the company wanted what is called loss of use cover, which would provide a temporary rental vehicle, if the truck was damaged. However, the broker understood that he wanted commercial vehicle cover for any rental vehicles the company may hire. 

An endorsement for rental vehicles was added to the policy without altering the premium. In July 2014, the truck was involved in accident. The company made a claim to insurer for the damage. The insurer accepted the claim and paid the repair cost. However, a dispute arose about cover for the cost of a temporary rental vehicle. 

The man raised concerns with the broker, stating that he had requested loss of use cover and requested compensation.

The broker disputed that the client had requested loss of use cover in 2009. The broker said that he had been offered loss of use cover on a number of occasions, but declined it due to the high cost. 

Instead, the broker believed that the man had requested commercial vehicle cover for rental vehicles. 

The case manager's assessment

When assessing complaints, the IFSO Scheme takes the available evidence into account. 

Unlike a court of law, however, the IFSO Scheme does not hear oral evidence on oath. For this reason, documentary evidence is usually more persuasive. 

Where the parties present conflicting oral evidence, the IFSO Scheme may not be able to establish what happened if there is no documentary evidence to assist. 

The recording of the telephone call in 2009 was no longer available at the time of the complaint and there was no telephone notes which assisted. Therefore, there was a direct conflict of oral evidence. However, even if it were established that the client had requested loss of use cover in 2009, and this was not undertaken appropriately, the company would still have to show it suffered a loss as a result. 

In bringing the complaint, the man said that the cost of the rental was $954.30 per week, for a total of $7,634.44. The insurer had also made an ex-gratia contribution of $3,000. 

The case manager looked at what position the company would have been in, if it had loss of use cover from 2009. From the case manager’s research, the company was paying low premiums at the time of the complaint, for the loss of use. Therefore, in order to fully consider the complaint, the case manager used the company’s current cover to determine the position it would have been in. 

When arranging loss of use cover, an insured needs to select the length of time they want cover for. The company had five weeks’ loss of use cover. If it had had that level of cover in 2014, there would have been cover for about $954.30 times five weeks, for a total of $4,771.50. This did not take into account possible deductions, including excess. In addition, if the loss of use cover were in place from 2009, the company would have been required to pay additional premiums for the loss of use cover between 2009 and September 2013; five years of premiums.

The company was paying about $481.56 for loss of use cover. As such, it would have paid an additional $2,407.80 in policy premiums. That was a saving that would need to be deducted from any calculation of loss. Therefore, the total claimable, of five weeks’ hire, less policy premiums ($4,771.50 less $2,407.80) was $2,363.70. Finally, the company also recovered $3,000 from its insurer. This means that, even if it were accepted that the client asked for loss of use in 2009, the company has already been sufficiently compensated for the potential loss.

March 2020

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