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Personal Lines QUESTION… A client’s vehicle has been written off as a result of a non-fault accident. The client’s claim has been settled and as the vehicle was a total loss they have paid for their insurance in full as they have had the benefit of the policy. Lets say for example the client’s insurance premium for the year was $600 and the claim happened the second month into the period of insurance so they still had 11 months to run on their policy. As a result of the non-fault accident the client’s policy has been cut short but they have stilled incurred the full annual premium. In such a case can the client recover the $550 for 11 months cover as an uninsured loss as this is an additional cost they have incurred. If yes and both insurers involved are part of K4K would the client’s insure then have to reimburse the client? Your comments and guidance would be appreciated as whilst I accept the client has had the benefit of the policy they have also incurred additional costs as a result of the accident. Thank you.

REPLY… GRAHAM SANDERS The K4K agreement relates only to insured losses. Uninsured losses must be recovered against the third party or the third party's insurer. Would the lost premium be an uninsured loss - I am not sure.
 REPLY… CROSSLEY GATES I defer to Graham on the Knock for Knock Agreement (although that is my recollection also when I worked in-house). But I wonder if your client has suffered the “financial loss” you refer to. If the negligent party had not collided with your client, you client would still have had to pay the annual premium. In other words, the balance of the premium was not incurred because of the collision. There is no causation here. REPLY… Thank you Crossley and yes I agree with what you are saying but if the client's vehicle is written off midway through their policy at six months they are still required to pay the balance of the premium for the remaining six months.The client then buys a new car which they then have to insure. This would mean the client has paid in theory for two years' worth of insurance but only receives 18 months' worth of cover. On this basis is there not a loss to our client? REPLY… CROSSLEY GATES I didn’t think of the purchase of insurance for the subsequent car, so yes you are right. The negligent act has accelerated the payment of another annual premium. This is a consequential financial loss, similar to the loss of a no-claims bonus for the next annual premium. I think this is probably sufficiently foreseeable to be recoverable at law from the negligent party. The amounts involved here are usually not sufficiently large to justify civil proceedings, but I do recall seeing a Scottish decision years ago where the court ordered payment of the amount of the no-claims bonus lost because of one collision caused by a negligent party.


September/October 2014

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Cover Note September Issue 2014  

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