Cedric E. Stephens, Contributor
Question: My business partner obtained a valuation for a 2008 Toyota Hiace Minibus on November 13, 2008. The company rep asked if we had received a duty concession on it. My partner replied yes. The vehicle was valued at $2.74 million. The report was given to our brokers to insure the vehicle.
On January 9, 2009, we were held up. The vehicle and personal items were stolen. We reported the incident at the Spanish Town Police Station and to the brokers. We owed the bank $1.9 million. In May, the broker's claims officer asked for the certificate of title. We learnt then that we had to pay duty in the sum of $496,201.40 before the title would be released. We also paid $15,000 to the Trade Board to find out if we could get relief from paying the duty.
The insurers offered a settlement of $2.46 million on August 12. When I asked about the duty we had paid, the broker said that he did not believe the insurers would pay it. The valuators and I spoke on August 17. Information about the value of the bus was supplied by the dealers. They were also told that all vehicles of that type were being given duty concessions.
Two estimates of value should have been stated in the valuation report: one with duty and the other without duty. Later that same day the valuators released a letter saying that the pre-loss value of our bus, without the duty concession was $3.27 million. Is the insurer likely to pay us more based on that letter?
- M.C.B., St. Catherine.
Answer: If your insurers were to decide to increase their offer of settlement by $500,000, I would be most surprised.
There are three reasons for my opinion. The contract that exists between them and you limits the amount you should be paid to a maximum of $2.74 million less an excess (or deductible) for loss or damage to the minibus. Why should they pay more? They also know that the loss-adjusting firm that valued the bus, or the broker, or both of them, made a mistake.
The result: your vehicle was underinsured. Finally, the insurers are aware that the valuators and brokers are required to buy insurance to protect them against making mistakes like the one they made in your case. Why then should they settle your claim for more than $2.46 million?
WAIVERS HAVE CONDITIONS
Waivers of customs and other duties come with many strings attached. They are not unlike loans granted by commercial banks or moneys borrowed from the likes of the World Bank or International Monetary Fund.
In the case of customs duties, the person or firm benefiting from the waiver agrees - for example, in the case of concessions or waivers for the purchase motor vehicles - not to dispose of the item within a certain period of time.
The waiver may also be granted on a one-off basis. These 'strings' affect insured values. If the asset is stolen or destroyed during the period of the waiver, duty becomes payable.
It is the norm in insurance practice to ignore the value of the duty concession in calculating the sums insured in cases like yours. The estimate of value of your minibus should have been calculated as if duty had been paid.
MISTAKES OF VALUATOR, BROKERS
The valuators know not that they know not! As a result, they say things that make absolutely no sense. Their August 17 letter refers to their November 13, 2008, valuation in which the "estimated market value" of your vehicle was determined at $2.74 million "on a concessionary basis."
They then go on to say that the "resolution of the claim will be dependent on a pre-loss value exclusive of government concession." Incredibly, the "pre-loss value without concession (for the same vehicle) has been derived at $3.237 million."
They conclude by hoping that those comments will lead to an equitable resolution of the claim.
The brokers are, indirectly, blaming the valuators and you for the problem. They placed insurance based on information supplied by your partner and the valuators. It was your job and that of the valuator to have told them about the duty concession.
The fact that both entities hold themselves out to be experts in insurance and valuing motor vehicles seems to have escaped them.
'A DUTY OF CARE'
In a discussion with the broker's claims official, it appeared to me that he was unaware - like the valuator's top guy - that his company owed you what lawyers call 'a duty of care'; that the responsibility meant where the firms' customers suffered loss or damage caused by their failure to use reasonable care in the carrying out of their duties, they can be held legally liable.
More simply: the costs of the mistakes in the valuing and insuring of your vehicle should be borne by them, not you and your partner.
Since none of the two firms appear willing to accept responsibility, find a trusted lawyer to help you to recover your $500,000. You should also seek his/her advice whether you should accept the payout from the insurers before taking action against the valuator and the broker.
Cedric E. Stephens provides independent information and free advice about the management of risks and insurance. Email: aegis@cwjamaica.com or send text (SMS) message to 812-7233.