Handling Vehicle Catastrophes

Paul Berne
Posted on August 5, 2010

[FULL DISCLOSURE: This public service article is being published as part of an advertising contract between LCT Magazine and Lancer Insurance. LCT did the final editing.]

Something goes bump in the night. Your limousine has been in a high-speed interstate accident resulting in a fatal injury to the other driver and injuries to your passengers. The scene is cluttered with wrecked vehicles, ambulances, policemen, firemen, and EMTs. A local TV crew arrives. After several hours, the road is clear, the injured are at medical care facilities, the officials are doing paperwork, and you're headed back to your office wondering what will happen next. You worry about your vehicle, company image, customers, and insurance rates. But's there's some good news in this situation. Your insurance company, a specialist in passenger transportation accidents, knows how to handle the claim. The limo claims experts take over from here.

What is involved in the claim adjusting process? Who does the work? How much work is there? What does it cost an insurance company to adjust a claim like the one described above?

You know that the limousine and livery industry has become a favorite target of plaintiff lawyers. You know that jury verdicts are out of control, and that you need to quickly and aggressively investigate and build a strong defense to any claim made against your company. Some insurance companies choose to stick their heads in the sand and avoid adjusting and legal expenses. What they pay at the back-end in higher settlements and verdicts more than offsets what they should have spent at the front-end to keep the loss costs under control. Let's break down where and how the money is spent.

The first response

Although the facts seem to indicate your driver is not at fault, your insurance company responds to the loss with a full court press. A skilled limousine loss experienced claims adjuster gets to the scene within an hour of the accident. He moves quickly to gather witness information, help your driver deal with the authorities, arrange for your vehicle to be moved to a secure lot, and to gather information on the other party. More than 50 photographs are taken within the first hour. A defense attorney is hired immediately to protect work product and establish attorney client privilege. An accident reconstruction engineer is immediately dispatched to the scene to measure skid marks, examine the vehicles, and complete a scientific analysis of what happened. In this case, aerial photography is required to preserve the exact appearance of the scene as its physical properties affect the liability determination.

What about your passengers? While the early indication is that the other party is at fault, your customers have immediate needs that are better met and paid for now. The adjuster arranges for transportation for them from the medical facilities, and tells them what the investigation will involve. They have questions that you can't answer about their medical expenses. But the adjuster knows the law, knows how medical benefits are prioritized with other insurance, and clearly communicates this information to your passengers. Your image is on the line. Your passengers are treated well and with a high degree of concern. Your business relationship is secure.

The media reports chaos and mayhem. Your insurance company is experienced in dealing with the press, and handles the communication in such a way that diffuses media interest within 12 hours of the incident. Within 24 hours, the media has lost interest in the story. Total adjusting cost on day one: $4,500. The dividends it will pay a year from now, however, confirm the high expense is well worth it.

What about your vehicle?

You have coverage for damage to your vehicle, but the other insurance company is not willing to accept liability and pay you for your loss. The adjuster handling the claim for your company arranges for your vehicle to be towed to a repair facility that knows what it's doing. A qualified appraiser - one who knows how a stretch limo is built, designed, and must be repaired - completes an appraisal. The adjuster arranges payment promptly. If your insurance company is on the ball, it helps you present your collision deductible claim, your downtime, and the replacement vehicle you hired to fill your trip orders. Total appraisal cost: $800. While expensive, the repairs are fast, safe, and correct. You have peace of mind when clients use the vehicle for that first trip after the limo has been returned to operation.

What's next?

Now the big battle begins. The insurance carrier for the driver of the car that hit your limousine contends that the accident was your driver's fault. So does the lawyer hired by the family of the decedent. A lawsuit is filed with punitive damages alleged. Your insurer, via evidence gathered at the preliminary adjusting phase, can establish that fault primarily rests with the other driver. The police suspected the car driver might have been under the influence of alcohol. Your insurance company hired a toxicologist to examine the lab records. This expert confirms that the level of intoxication was sufficient to impair driving ability - not by much, but there is an argument that it contributed to the accident. The accident reconstruction engineer produces a video animation that demonstrates that fault could not rest entirely with your driver. Of course, the plaintiff attorney has hired an expert with similar credentials, and his reconstruction indicates that fault rests with your driver.

The plaintiff attorney scrutinizes your company records to the last detail, including driver files, maintenance records, and safety/training programs. Unfortunately, the records reveal that the vehicle missed the completion of scheduled maintenance relating to the brakes. The records also show you knew about it, but you were fully booked and just didn't get to it. This creates a major problem; you are exposed to punitive damages and the jury will be inflamed by what the plaintiff attorney will describe as your "putting profits ahead of safety." He'll argue that you had a "conscious disregard for the safety of others." Another expert is hired to defend you; this one specializes in explaining to juries why your conduct did not contribute to the accident. The case will be made that any issues with the brakes could not have had anything to do with the accident. The defense knows that will be a tough sell.

Accumulating costs

Most of the cost of handling the claim arises at this phase of the claim handling process. The accident reconstruction and animation run $15,000. The legal fees have reached $35,000 as the case nears trial. Other related expenses now total $12,000, including the brakes specialist, toxicologist, adjuster, appraiser and other work done by the team that supports your defense. None of this includes what your insurer is spending for its staff, in-house lawyers and senior claims management oversight of the case.

The jury decides. . . 

Cases take twists and turns over the months and years they stay open. In the final analysis, what looked like a favorable liability situation for your company turns out to be a toss-up at best, with a better than 50-50 chance that a jury will find your driver is at least 75% at fault. But, your passengers have been treated fairly and promptly all along. They did not hire attorneys; their claims are settled and closed. Your insurer gets aggressive in demanding a contribution to the settlements for your passengers from the insurance carrier for the adverse auto. Under threat of a contribution action lawsuit, that carrier finally relents and pays a significant percentage of each claim.

The trial judge has already ruled on your effort to get into evidence the apparent alcohol consumption of the decedent. His ruling is not favorable. You are prohibited from discussing it at trial. Worse news: He rules in favor of the plaintiff on the admission of evidence against your company relating to your maintenance, and will let the jury decide if your brakes had anything to do with the accident. The case has a verdict range of $2 million to $3 million without the brakes-related evidence against your company. With the evidence, the verdict range could increase by 50%, or more.

By leveraging the evidence gathered, experts hired and through the skilled handling of your attorney and claims adjuster, the case is settled for $1.2 million two weeks before trial. The total adjusting and legal cost is $124,000. Every penny spent was worth it; had the case not been prepared as it was, the outcome would have been a much higher settlement, or a verdict well in excess of what the case ultimately cost.

Some claims are fairly simple; fixed object or parked car cases, no liability incidents, and low impact fender-benders without injuries. When the bad thing happens, however, involving injuries, fatalities, and extensive property damage, insurance companies must step up the tempo and spend the time and money necessary to build the best defense possible. Strange as it seems, spending money on claims will help control loss costs. That keeps you in business. 

Related Topics: accident reporting, insurance rates

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