This is standard in most all property and casualty policies. The insured must promptly notify the company in case of a loss with full details. The insured must cooperate with the company in its investigation. The insured must protect the property from further damage. The company will pay these additional costs. For example, if the insured has an accident on the interstate, the company will pay the towing expense to take the vehicle to a safe place. Should the insured fail to report a claim, the insured may forfeit his coverage. The company deserves the right to obtain prompt notice to properly investigate the claim. Often times there may occur a slight accident where no apparent damage is visible. The air bags did not deploy, which would indicate a minor impact. The operators exchange basic information and go on their way. The other party to the accident sues one year later. The company had no opportunity to gather the facts and will probably issue to the insured a "reservation of rights" letter. This tells the insured that the company will investigate the claim but reserves the right to withhold payment if its rights have been compromised because of the late reporting of the claim.
Case in Point: In a claim where the insured's daughter was following a line of traffic and a car abruptly stopped. There were several rear end types of accidents in this line of traffic. The police investigated and wrote down all the names of the drivers in the line of traffic. The insured's daughter stopped in time and did not strike the vehicle in front of her. About six months later the insured received notice of suit in the amount of $100,000 and did nothing.
The insured felt that since her daughter was not physically involved in the accident that there was nothing to do and the insured disregarded the suit. As most of us know all suits must be answered or the court assumes that you are admitting guilt. The insured did not notify the agent or the company and continued to do nothing. Approximately sixty days later she was ordered by the court to pay the default judgment of $100,000. The company issued the insured a "reservation of rights" letter. A very sympathetic judge finally resolved the matter. The
insured was lucky and neither the insured nor the company had to pay the default judgment.
Section VI Review
Review of Actual Claim: The insured has decided to visit a friend and parks his car under a tree for a week. The insured discovers that his convertible top is ruined by tree sap.
1. Would this loss be covered under the other than collision coverage?
2. Is this loss considered to be "direct and accidental"?
Review Questions
1. A vehicle is damaged by a falling tree. Coverage would apply to which coverage?
A. Collision
B. Other than Collision
2. A deer is struck by our insured's vehicle. This is an example of:
A. Collision
B. Other than Collision
3. A vehicle simply rolls over an embankment and flips doing considerable damage. This is an example of:
A. Collision
B. Other than Collision
4. A vehicle is stolen and when it is recovered, a considerable amount of collision damage is discovered. This is an example of:
A. Collision
B. Other than Collision
Answers to Claim Review 1. Yes.
2. Yes.
Answers To Review Questions 1. B
2. B 3. A 4. B
VII. General Policy Provisions
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The items under this section of the policy spell out certain provisions such as bankruptcy, changes in the policy, fraud, legal action against the company, the company's right to recover payment, termination of the policy, non-renewal and a few other items.
Bankruptcy
Should the insured become bankrupt, the insurance company is not relieved of its obligations in the policy to protect the insured or obligations under the policy.
Changes
All changes in the policy shall be approved and done so with an endorsement issued by the company. Should the company make a change in all such policies that may broaden the coverage without additional premium charge that change will automatically apply to the insured's policy as of the date of the change. Some policies call this the "liberalization clause".
Fraud
Coverage will be voided should any "insured" who has made fraudulent statements or engaged in any fraudulent conduct in connection with any accident or loss for which coverage is sought.
This clause is in all property and casualty policies. This would not apply to the "named insured"
that loans his car to a friend and the friend is guilty of fraud. The friend would be excluded from coverage but the insured would still be protected.
What if one family member is guilty of fraud but the others are not? Does the fraudulent act of one insured affect the rights of the other family members? The answer is no because of the wording in the policy Some policies are written in a form where the acts of one spouse will void coverage for both. This is true is some homeowner policies.