Further to my last post, the question often is whether a worker is in the course of employment or not.
For example, if a worker is on a smoke break at work when they get injured, is this an “injury by accident, arising out of and in the course of his or her employment”? Is this employee entitled to benefits from the Worker’s Compensation fund or is the worker able to sue?
There are several decisions from the Workplace Safety and Insurance Appeals Tribunal (“WSIAT”), going back 15 to 20 years ago, in which the Tribunal held that workers who drive around most of the day as part of their employment and who have an accident while on a coffee break, stopping for lunch or running an errand not far off their scheduled route, do not create a “distinct departure” from their employment activities. Therefore, the accident was held to fall within the parameters of Section 13 of the WSIA, 1997, “an accident arising out of and in the course of employment”. The WSIAT ruled that the tort action was barred. These are cited at WSIAT decisions 351/90, 62/94 and 669/89.
In another case found at WSIAT decision 901/95, at paragraph 44, the tribunal found that a plaintiff who slipped and fell when he was going into a donut shop was engaged in a work-related activity that was reasonably incidental to his employment. In that instance, the plaintiff was a salesman and often used the donut shop for filling out paper work because he did not have an office of his own. He also often met clients at the donut shop.
The test used by the WSIAT is whether the personal injury in a work-related activity was “reasonably incidental” to the injured person’s employment. The WSIAT, in their decision of 901/95, also stated that they were persuaded that the plaintiff was engaged in a work-related activity that was reasonably incidental to his employment on the basis that the timing, duration, and potential cancellation of each break was determined by the requirements of the plaintiff. In other words, the plaintiff, as a salesman, was self-directed and there was not a bright line to distinguish between when he was on a break or when he was working in the donut shop.
In a more recent decision, the WSIAT, at decision 285/05, affirmed the work-relatedness test when deciding that an employee’s right of action had been taken away by the WSIA, 1997 when the employee slipped and fell in a parking lot of an airport while on a business trip.
The WSIB has an Operational Policy Manual which contains policies related to this issue. Policy document 15-02-02, which applies to all decisions made on or after July 1, 1990, states that a personal injury by accident occurs in the course of employment if the surrounding circumstances relating to place, time and activity indicate that the accident was work-related. Further, policy document 15-03-03, applicable to all decisions made on or after June 1, 1989, states that a worker is considered to be in the course of employment on entering the employer’s premises but that the “in the course of employment” status ends on leaving the employer’s premises, unless the worker leaves the premises for the purposes of employment. These policies seem to be in conformity with the WSIAT’s decisions.
Rabu, 08 Juli 2009
Minggu, 05 Juli 2009
Worker's Compensation in Ontario and Restrictions on the Right to Sue an Employer
The Workplace Safety and Insurance Act, 1997 governs the Ontario workers’ compensation system.
Fundamental to this system is a compromise in which workers give up the right to sue for their work-related injuries, irrespective of fault, in return for guaranteed compensation for accepted claims.
Employers receive protection from lawsuits in exchange for financing the program through premiums.
Employees cannot sue employers or most other employers for injuries occurring during employment, in most circumstances.
This system of collective liability provides compensation for injured workers and their families, while spreading individual costs among employers.
It means that if an employee commences a lawsuit against its employer or other employer, that employer can have the lawsuit dismissed.
Here is how it works:
Section 13(1) of the WSIA, 1997 states that a worker who sustains a personal injury by accident, arising out of and in the course of his or her employment, is entitled to benefits under the insurance plan.
Section 28 of the WSIA, 1997 provides that a worker employed by a Schedule 1 employer is not entitled to commence an action against any Schedule 1 employer (or a Director, Executive Officer or a worker employed by any Schedule 1 employer) in respect of the worker’s injury. This protection from lawsuits is the trade-off for the compensation injured workers receive.
Section 27 of the WSIA, 1997 states that Section 28 applies with respect to a worker who sustains an injury that entitles him or her to benefits under the insurance plan. Therefore, this prevents workers who are entitled to benefits under the insurance plan from suing another employer who is also within the same Schedule 1.
Fundamental to this system is a compromise in which workers give up the right to sue for their work-related injuries, irrespective of fault, in return for guaranteed compensation for accepted claims.
Employers receive protection from lawsuits in exchange for financing the program through premiums.
Employees cannot sue employers or most other employers for injuries occurring during employment, in most circumstances.
This system of collective liability provides compensation for injured workers and their families, while spreading individual costs among employers.
It means that if an employee commences a lawsuit against its employer or other employer, that employer can have the lawsuit dismissed.
Here is how it works:
Section 13(1) of the WSIA, 1997 states that a worker who sustains a personal injury by accident, arising out of and in the course of his or her employment, is entitled to benefits under the insurance plan.
Section 28 of the WSIA, 1997 provides that a worker employed by a Schedule 1 employer is not entitled to commence an action against any Schedule 1 employer (or a Director, Executive Officer or a worker employed by any Schedule 1 employer) in respect of the worker’s injury. This protection from lawsuits is the trade-off for the compensation injured workers receive.
Section 27 of the WSIA, 1997 states that Section 28 applies with respect to a worker who sustains an injury that entitles him or her to benefits under the insurance plan. Therefore, this prevents workers who are entitled to benefits under the insurance plan from suing another employer who is also within the same Schedule 1.
Rabu, 01 Juli 2009
Small Claims Court - $25,000 Limits
On January 1, 2010, the monetary jurisdiction of Small Claims Court in Ontario will be raised from $10,000 to $25,000. The limit had not changed since 2001 when it was increased from $6,000 to $10,000.
The question I have been wondering is, what will happen to cases started prior to January 1, 2010, but which claim between $10,000 and $25,000? If you start a case before Jan. 1 for $25,000, will it automatically be transferred to Small Claims Court after that date?
The answer seems to be no.
Section 23(2) of the Courts of Justice Act states:
"An action in the Superior Court of Justice may be transferred to the Small Claims Court by the local registrar of the Superior Court of Justice on requisition with the consent of all parties filed before the trial commences if,
Another reason might be the costs rules which are limited in Small Claims Court to 15% of a claim (this can be doubled if a party beats at trial its own offer to settle, in certain circumstances). Of course this is more restrictive than the costs that are available to a successful party in a Superior Court action.
The consequence to a plaintiff however for failing to transfer a proper case to the Small Claims Court may be an order that the plaintiff not receive any costs. See Rule 57.05 of the Rules of Civil Procedure.![Reblog this post [with Zemanta]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_ujErdccLuU0fkDSXo23TDArBeap2zIHSJQi86BhoSJn4vmrq4x2SqLb0ymR-gN2sHHfSqAfF_6MRFc2_bxr_s63d_EbwDNPakLor-DFPjzWhbcuWizbY0AA7qmAmgs-E5bLJtxdnAa3g6iLvw9IwDB=s0-d)
The question I have been wondering is, what will happen to cases started prior to January 1, 2010, but which claim between $10,000 and $25,000? If you start a case before Jan. 1 for $25,000, will it automatically be transferred to Small Claims Court after that date?
The answer seems to be no.
Section 23(2) of the Courts of Justice Act states:
"An action in the Superior Court of Justice may be transferred to the Small Claims Court by the local registrar of the Superior Court of Justice on requisition with the consent of all parties filed before the trial commences if,
(a) the only claim is for the payment of money or the recovery of possession of personal property; and
(b) the claim is within the jurisdiction of the Small Claims Court."
It seems that this rule will apply for transfers after January 1, 2010.
In the absence of consent among the parties, a change will require a motion to the Superior Court of Justice.
Another reason might be the costs rules which are limited in Small Claims Court to 15% of a claim (this can be doubled if a party beats at trial its own offer to settle, in certain circumstances). Of course this is more restrictive than the costs that are available to a successful party in a Superior Court action.
The consequence to a plaintiff however for failing to transfer a proper case to the Small Claims Court may be an order that the plaintiff not receive any costs. See Rule 57.05 of the Rules of Civil Procedure.
Rabu, 24 Juni 2009
Pierringer-type Agreements
Pierringer-type agreements are exotic sounding. But are they really useful or worthwhile using in everyday insurance-type cases?
It seems to me that in the proper circumstances they can, in fact, be quite useful. And they are not really as complicated or exotic as they might at first seem.
They are useful where one defendant is willing to settle with the plaintiff while the other defendant is not.
The agreement simply permits the plaintiff to settle with the "settling defendant" but proceed with the action against the "non-settling defendant".
Such an agreement was approved by the Ontario Court of Appeal in JM and WB, 2004 O.J. No 2312, 71 O.R. (3d) 171 (C.A.).
The agreement should provide:
1. That the settlement and payment contemplated are not to be taken as an admission of liability on the part of the settling defendant;
2. That the action will be dismissed as against the settling defendant, on consent and without costs;
3. That the plaintiffs will use their best efforts to cause any crossclaims against the settling defendant to be similarly dismissed, without costs, in order to fully and finally conclude all litigation arising from the matters pleaded in the action against the settling defendant;
4. A full and final release by the plaintiffs in favour of the settling defendant;
5. That the plaintiffs will indemnify and hold harmless the settling defendant from any crossclaim or third party claim, and any other proceeding or claim arising from the issues and allegations in the within action; and
6. For the disclosure of the agreement, including the settlement amount provided thereunder, to the trial court, on certain conditions.
The indemnity provision should state that the plaintiffs restrict their claim to whatever the non‑settling defendants may be directly liability for and, as such, non-settling defendants cannot be jointly liable with the settling defendant.
This means that non-settling defendants have no basis to seek contribution, indemnity, relief over by way of equitable subrogation, declaratory relief or otherwise against the settling defendant.
An order should then be obtained dismissing the plaintiffs’ claim against the settling defendant, after which the plaintiffs amend their statement of claim, on consent, to reflect its compromises in its claim detailed in the Pierringer agreement, stating as follows:
The plaintiff has agreed with the settling defendant that it shall limit its claims against the non-settling defendants to claims for damages, costs and interest attributable only to the non-settling defendants share of liability to the plaintiff (and joint liability to one another, if any, and if there is more than one non-settling defendant) such that the plaintiff’s recovery shall be limited to recovering the damages, costs and interest attributable to the non-settling defendants’ several share of liability (or joint share of liability if more than one non-settling defendant) as proven against it or them at trial.
For greater certainty, the plaintiff shall have no claim directly or indirectly against the settling defendant and the plaintiff shall limit its claim against the non-settling defendant so as to exclude any crossclaim or third party claim made against or which could be made against the settling defendant arising from the issues in this action.
The plaintiff admits that the Court at any trial of this matter has and shall have full authority to adjudicate upon the apportionment of liability, if any, between all defendants named in the Statement of Claim, including the settling defendants, whether or not the settling defendants remain as parties by crossclaim or third party claim in this action.
The terms of the agreement listed above, plus amendments to the Statement of Claim, were approved by the Court of Appeal for Ontario in the above-noted decision.
It seems to me that in the proper circumstances they can, in fact, be quite useful. And they are not really as complicated or exotic as they might at first seem.
They are useful where one defendant is willing to settle with the plaintiff while the other defendant is not.
The agreement simply permits the plaintiff to settle with the "settling defendant" but proceed with the action against the "non-settling defendant".
Such an agreement was approved by the Ontario Court of Appeal in JM and WB, 2004 O.J. No 2312, 71 O.R. (3d) 171 (C.A.).
The agreement should provide:
1. That the settlement and payment contemplated are not to be taken as an admission of liability on the part of the settling defendant;
2. That the action will be dismissed as against the settling defendant, on consent and without costs;
3. That the plaintiffs will use their best efforts to cause any crossclaims against the settling defendant to be similarly dismissed, without costs, in order to fully and finally conclude all litigation arising from the matters pleaded in the action against the settling defendant;
4. A full and final release by the plaintiffs in favour of the settling defendant;
5. That the plaintiffs will indemnify and hold harmless the settling defendant from any crossclaim or third party claim, and any other proceeding or claim arising from the issues and allegations in the within action; and
6. For the disclosure of the agreement, including the settlement amount provided thereunder, to the trial court, on certain conditions.
The indemnity provision should state that the plaintiffs restrict their claim to whatever the non‑settling defendants may be directly liability for and, as such, non-settling defendants cannot be jointly liable with the settling defendant.
This means that non-settling defendants have no basis to seek contribution, indemnity, relief over by way of equitable subrogation, declaratory relief or otherwise against the settling defendant.
An order should then be obtained dismissing the plaintiffs’ claim against the settling defendant, after which the plaintiffs amend their statement of claim, on consent, to reflect its compromises in its claim detailed in the Pierringer agreement, stating as follows:
The plaintiff has agreed with the settling defendant that it shall limit its claims against the non-settling defendants to claims for damages, costs and interest attributable only to the non-settling defendants share of liability to the plaintiff (and joint liability to one another, if any, and if there is more than one non-settling defendant) such that the plaintiff’s recovery shall be limited to recovering the damages, costs and interest attributable to the non-settling defendants’ several share of liability (or joint share of liability if more than one non-settling defendant) as proven against it or them at trial.
For greater certainty, the plaintiff shall have no claim directly or indirectly against the settling defendant and the plaintiff shall limit its claim against the non-settling defendant so as to exclude any crossclaim or third party claim made against or which could be made against the settling defendant arising from the issues in this action.
The plaintiff admits that the Court at any trial of this matter has and shall have full authority to adjudicate upon the apportionment of liability, if any, between all defendants named in the Statement of Claim, including the settling defendants, whether or not the settling defendants remain as parties by crossclaim or third party claim in this action.
The terms of the agreement listed above, plus amendments to the Statement of Claim, were approved by the Court of Appeal for Ontario in the above-noted decision.
Sabtu, 20 Juni 2009
Limitation Periods
Grewal v. Ivany, 2008 ONCA 687.
This is an interesting decision of the Court of Appeal of Ontario from last year. It addresses the issue of discoverability and when a limitation period starts running.
In Ontario, claimants normally have two years to commence an action. This however is subject to discoverability.
The injured parties were involved in a motor vehicle accident and waited three and a half years to commence an action. The motion judge dismissed the plaintiff's action as out of time.
The Court of Appeal held that the plaintiff's lack of prognosis, along with a medical notation in the family doctor's notes that the plaintiff's pain is chronic, were not enough to start the limitation period running.
Further the Court of Appeal said that there wasn't enough evidence to conclude that the plaintiff would meet the threshold or not, so he couldn't know if he should commence a claim or not. This was despite the fact that the plaintiff had admitted during cross examination that he was uncertain if his neck pain would go away at a time more than two years before he commenced the action. In other words, he knew he had pain and he knew he might not get better.
It is interesting that the threshold seems to have protected the plaintiff from the statute of limitations.
This is an interesting decision of the Court of Appeal of Ontario from last year. It addresses the issue of discoverability and when a limitation period starts running.
In Ontario, claimants normally have two years to commence an action. This however is subject to discoverability.
The injured parties were involved in a motor vehicle accident and waited three and a half years to commence an action. The motion judge dismissed the plaintiff's action as out of time.
The Court of Appeal held that the plaintiff's lack of prognosis, along with a medical notation in the family doctor's notes that the plaintiff's pain is chronic, were not enough to start the limitation period running.
Further the Court of Appeal said that there wasn't enough evidence to conclude that the plaintiff would meet the threshold or not, so he couldn't know if he should commence a claim or not. This was despite the fact that the plaintiff had admitted during cross examination that he was uncertain if his neck pain would go away at a time more than two years before he commenced the action. In other words, he knew he had pain and he knew he might not get better.
It is interesting that the threshold seems to have protected the plaintiff from the statute of limitations.
Kamis, 18 Juni 2009
Proof of Loss
Section 136 - "No action shall be brought for the recovery of money payable under a contract of insurance until the expiration of sixty days after proof, in accordance with the provisions of the contract,
(a) of the loss; or
(b) of the happening of the event upon which the insurance money is to become payable,
or of such shorter period as is fixed by the contract of insurance."
I would take this to mean that if a court action is started before sixty days have elapsed that the insurer may bring a motion to dismiss the action.
Is this a complete bar to a court action?
The preceding section, s. 135 of the Insurance Act, requires insurers to "furnish forms" for proof of loss to the insured. Insurers are required to send these "Proof of Loss" forms to insured claimants.
My question is this, if the insured fails to complete and return these "Proof of Loss" forms but in all other respects cooperates with the insurer and the insurer conducts a thorough investigation of the loss, can the insurer rely on the failure to complete and return the "Proof of Loss" forms as a bar to the insured's action? Or can there be "deemed" notice of proof of loss in certain circumstances? Finally, what if the "Proof of Loss" forms are completed and returned to the insurer but the insured commences her/his court action prior to waiting sixty days?
(a) of the loss; or
(b) of the happening of the event upon which the insurance money is to become payable,
or of such shorter period as is fixed by the contract of insurance."
I would take this to mean that if a court action is started before sixty days have elapsed that the insurer may bring a motion to dismiss the action.
Is this a complete bar to a court action?
The preceding section, s. 135 of the Insurance Act, requires insurers to "furnish forms" for proof of loss to the insured. Insurers are required to send these "Proof of Loss" forms to insured claimants.
My question is this, if the insured fails to complete and return these "Proof of Loss" forms but in all other respects cooperates with the insurer and the insurer conducts a thorough investigation of the loss, can the insurer rely on the failure to complete and return the "Proof of Loss" forms as a bar to the insured's action? Or can there be "deemed" notice of proof of loss in certain circumstances? Finally, what if the "Proof of Loss" forms are completed and returned to the insurer but the insured commences her/his court action prior to waiting sixty days?
Minggu, 29 Maret 2009
Keeping, Dropping or Changing Your Comprehensive or Collision Coverage
Managing the cost of your insurance car insurance northern ireland, for example) can be as simple as answering a few simple questions. Here's a short discussion that will walk you through the process of deciding to keep, drop or to change (different deductible) your comprehensive and/or collision coverages in your car insurance policy. First we need to do a very short 'inventory.'
TAKING YOUR FINANCIAL PICTURE -
Insurance is simply the management of risk. Owning and driving an automobile is a risk. You risk injury, loss of your vehicle, and potential liability for damage to others. The purchase of insurance is merely an agreement with the company to transfer some of your risk to them. You are saying, "I choose not to assume all of this risk myself. In exchange for my premium dollars, the insurance company will suffer some of the financial loss instead of me." With this thought in mind, you must decide how much risk to transfer and in doing so, decide how much risk you are willing to keep yourself in the from of deductibles and unpurchased coverages.
Before we can get to ways to save money on your premium, you need to take a short inventory of your financial picture.
Before you get to deciding whether to take a $100 or a $500 deductible on your collision coverage you first need to decide that you can reasonably handle a $500 loss. So before we jump into any tricks of the trade, lets take a moment to diagnose your "loss threshold."
Lets say you go out and buy a $3 picture to hang in your bathroom. Are you going to insure it? Of course not! Now you go out and buy a famous $252,000 masterpiece painting. Are you going to insure it? Unless you are a multi-millionaire, you certainly will. Somewhere in between the $3 print and the $252,000 masterpiece is your loss threshold. Your loss threshold is the amount of money you can stand to lose without doing any great harm to your daily lifestyle or your peace-of-mind. In the above example, different people will have different thresholds. There is no right or wrong answer here!
In addition to settling on your personal loss threshold, it is important to consider your previous history of insurance losses. If you have had several losses in the last 10 years, you may be wise to lean more heavily on your insurance coverage. If, on the other hand, you go almost forever between losses, you will save premium dollars by assuming more of the risk yourself in the form of higher deductibles or dropped coverages. Now, if assuming this extra risk is going to give you some sleepless nights and make you a nervous wreck every time you get into your car, then don't do it! Part of what you buy in the purchase of insurance is peace of mind.
What matters most is where you are comfortable. Take a moment to apply a value to your "Loss Threshold." Try thinking in terms of $50, $100, $250, $500, and $1000. How much money can you, with peace of mind, place at risk? As you will see below, once you determine your Loss Threshold, you need only to weigh the cost of the coverage versus the potential for loss to you. Insurance can be a reasonably simple commodity to manage.
1. DROP YOUR COLLISION COVERAGE-
So you have been driving "Old Betsy" now ever since Noah was working on his boat. To you, its worth every bit of what you may have paid for it way back when but to another car buyer, its just an old bucket of bolts, rubber, faded upholstery. Unfortunately, the insurance company views your precious 4-wheeled family member with the same cold business approach as a prospective buyer. Its only worth...well, its worth a lot less than you would hope.
There comes a time in the life of almost every car when its value does not warrant the cost of collision coverage any longer. Collision coverage is that portion of your insurance that pays to fix damage to your car suffered by a collision. You will need this coverage for your car when you are in an accident that is your fault or if your car is the victim of a Hit & Run accident. Looking back to your Financial Picture we discussed above, compare the cost of your coverage with the potential for loss.
In discussions with your agent or by examining your renewal bill, identify the annual cost of your collision coverage. By looking in the newspaper or car-trading publications, determine the actual retail value of your car. Be careful to be objective here and remove whatever emotional attachment you may have to your car that might unrealistically increase its perceived value.
Let's say that the real value of your car is $1200 and the annual cost of just your collision coverage with a $100 deductible is $150. Now here are the Test Questions:
2. DROP YOUR COMPREHENSIVE COVERAGE -
Comprehensive coverage like collision coverage is designed to protect your car from loss. Much of the same logic that we applied to collision coverage can be used to decide on the fate of your comprehensive coverage. There are, however some important considerations to weigh in your analysis.
Comprehensive coverage covers almost anything that happens to your car except collision. The most commonly submitted claims are broken windshields, stolen hub caps, stolen stereos, vandalism and theft of the entire vehicle. Note here that many of these losses produce the same
amount of financial loss regardless of the value of the car. It costs virtually the same to replace a windshield in a 75 Ford as it does in an 85 Ford. Consider also that the cost of comprehensive coverage is much less than collision coverage. The ratio between money saved and dollars put at risk is smaller and therefore you may be less eager to drop this coverage. Ask yourself the Test Questions that we did for collision coverage and make an informed decision.
If your vehicle is financed or leased, always remember to check with your financial institution before changing these coverages. Your loan contract may have certain requirements and deductible limitations that somewhat restrict your options.
3. RAISE YOUR DEDUCTIBLES -
If deleting collision and comprehensive coverage puts you at greater risk than you are willing to assume at this time, you may want to consider increasing your deductibles as a compromise. As you increase your deductibles you decrease your premium. The insurance company is going to give you a break on your premium here for two reasons. First, when you have a loss, the insurance company will pay you less money when you have a higher deductible. Secondly, with a higher deductible, you will have fewer claims that are presented to the insurance company in excess of your deductible.
When you take a higher deductible you are saying that you, for the consideration of a lower premium are willing to assume a greater portion of the loss yourself. You trade the certainty of a lower premium for the uncertainty of more loss to you should a claim occur.
If you have decided in your Financial Picture that you are comfortable with a $500 loss (and the premium savings is enough) and you own a car worth $3000 then you probably do not want to drop your collision coverage completely. But you can increase your $100 collision deductible to $500 and your zero comprehensive deductible to $100. Let's examine the numbers. If you save $30 per year on your comprehensive coverage and $65 per year on your collision deductible you realize a $95 per year savings the first year and every year thereafter. You are only increasing your risk by $100 on the comprehensive coverage and by $400 on the collision coverage. Remember you already had a $100 deductible on collision and increasing it to $500 changes your participation in the loss by $400. Again, ask yourself the same questions.
It's a Good Life !
Dennis Volz Insurance Agency
10791 Jamacha Bl, Suite 1, Spring Valley, CA 91978
OFFICE: (619) 670-1000 - FAX: (619) 670-1121
eMail:Dennis@DennisVolzInsurance.com
Websites: Company Site: DennisVolzInsurance.com
This post contains only a general description of coverages and is not your insurance contract. Details of coverage or limits can vary. All coverages are determined by the terms, provisions, exclusions and conditions of your policy along with any endorsements.
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TAKING YOUR FINANCIAL PICTURE -
Insurance is simply the management of risk. Owning and driving an automobile is a risk. You risk injury, loss of your vehicle, and potential liability for damage to others. The purchase of insurance is merely an agreement with the company to transfer some of your risk to them. You are saying, "I choose not to assume all of this risk myself. In exchange for my premium dollars, the insurance company will suffer some of the financial loss instead of me." With this thought in mind, you must decide how much risk to transfer and in doing so, decide how much risk you are willing to keep yourself in the from of deductibles and unpurchased coverages.
Before we can get to ways to save money on your premium, you need to take a short inventory of your financial picture.
Before you get to deciding whether to take a $100 or a $500 deductible on your collision coverage you first need to decide that you can reasonably handle a $500 loss. So before we jump into any tricks of the trade, lets take a moment to diagnose your "loss threshold."Lets say you go out and buy a $3 picture to hang in your bathroom. Are you going to insure it? Of course not! Now you go out and buy a famous $252,000 masterpiece painting. Are you going to insure it? Unless you are a multi-millionaire, you certainly will. Somewhere in between the $3 print and the $252,000 masterpiece is your loss threshold. Your loss threshold is the amount of money you can stand to lose without doing any great harm to your daily lifestyle or your peace-of-mind. In the above example, different people will have different thresholds. There is no right or wrong answer here!
In addition to settling on your personal loss threshold, it is important to consider your previous history of insurance losses. If you have had several losses in the last 10 years, you may be wise to lean more heavily on your insurance coverage. If, on the other hand, you go almost forever between losses, you will save premium dollars by assuming more of the risk yourself in the form of higher deductibles or dropped coverages. Now, if assuming this extra risk is going to give you some sleepless nights and make you a nervous wreck every time you get into your car, then don't do it! Part of what you buy in the purchase of insurance is peace of mind.
What matters most is where you are comfortable. Take a moment to apply a value to your "Loss Threshold." Try thinking in terms of $50, $100, $250, $500, and $1000. How much money can you, with peace of mind, place at risk? As you will see below, once you determine your Loss Threshold, you need only to weigh the cost of the coverage versus the potential for loss to you. Insurance can be a reasonably simple commodity to manage.
1. DROP YOUR COLLISION COVERAGE-
So you have been driving "Old Betsy" now ever since Noah was working on his boat. To you, its worth every bit of what you may have paid for it way back when but to another car buyer, its just an old bucket of bolts, rubber, faded upholstery. Unfortunately, the insurance company views your precious 4-wheeled family member with the same cold business approach as a prospective buyer. Its only worth...well, its worth a lot less than you would hope.
There comes a time in the life of almost every car when its value does not warrant the cost of collision coverage any longer. Collision coverage is that portion of your insurance that pays to fix damage to your car suffered by a collision. You will need this coverage for your car when you are in an accident that is your fault or if your car is the victim of a Hit & Run accident. Looking back to your Financial Picture we discussed above, compare the cost of your coverage with the potential for loss.
In discussions with your agent or by examining your renewal bill, identify the annual cost of your collision coverage. By looking in the newspaper or car-trading publications, determine the actual retail value of your car. Be careful to be objective here and remove whatever emotional attachment you may have to your car that might unrealistically increase its perceived value.
Let's say that the real value of your car is $1200 and the annual cost of just your collision coverage with a $100 deductible is $150. Now here are the Test Questions:
- Can I afford to withstand this loss without any help from the insurance company? (in this case $1200)
- Would I rather save $XX (in this case $150) every year and risk the loss of the car myself? By not getting this coverage I am saving $XX ($150) per year. I will save enough to make up the loss ($1200) in Y (8) years. (1200 ÷ 150 = 8)
- Does my driving and claim history lead me to believe that I might go Y (8) years without suffering that sort of loss?
2. DROP YOUR COMPREHENSIVE COVERAGE -
Comprehensive coverage like collision coverage is designed to protect your car from loss. Much of the same logic that we applied to collision coverage can be used to decide on the fate of your comprehensive coverage. There are, however some important considerations to weigh in your analysis.
Comprehensive coverage covers almost anything that happens to your car except collision. The most commonly submitted claims are broken windshields, stolen hub caps, stolen stereos, vandalism and theft of the entire vehicle. Note here that many of these losses produce the same
amount of financial loss regardless of the value of the car. It costs virtually the same to replace a windshield in a 75 Ford as it does in an 85 Ford. Consider also that the cost of comprehensive coverage is much less than collision coverage. The ratio between money saved and dollars put at risk is smaller and therefore you may be less eager to drop this coverage. Ask yourself the Test Questions that we did for collision coverage and make an informed decision.If your vehicle is financed or leased, always remember to check with your financial institution before changing these coverages. Your loan contract may have certain requirements and deductible limitations that somewhat restrict your options.
3. RAISE YOUR DEDUCTIBLES -
If deleting collision and comprehensive coverage puts you at greater risk than you are willing to assume at this time, you may want to consider increasing your deductibles as a compromise. As you increase your deductibles you decrease your premium. The insurance company is going to give you a break on your premium here for two reasons. First, when you have a loss, the insurance company will pay you less money when you have a higher deductible. Secondly, with a higher deductible, you will have fewer claims that are presented to the insurance company in excess of your deductible.
When you take a higher deductible you are saying that you, for the consideration of a lower premium are willing to assume a greater portion of the loss yourself. You trade the certainty of a lower premium for the uncertainty of more loss to you should a claim occur.
If you have decided in your Financial Picture that you are comfortable with a $500 loss (and the premium savings is enough) and you own a car worth $3000 then you probably do not want to drop your collision coverage completely. But you can increase your $100 collision deductible to $500 and your zero comprehensive deductible to $100. Let's examine the numbers. If you save $30 per year on your comprehensive coverage and $65 per year on your collision deductible you realize a $95 per year savings the first year and every year thereafter. You are only increasing your risk by $100 on the comprehensive coverage and by $400 on the collision coverage. Remember you already had a $100 deductible on collision and increasing it to $500 changes your participation in the loss by $400. Again, ask yourself the same questions.
- Can I afford to withstand this loss (the bigger deductible) without any help from the insurance company?
- Would I rather save this money ($95) and risk the larger deductible loss myself? By taking this bigger deductible I am saving $95 per year. I will save enough money to make up the loss in one year for a comprehensive loss and in just over four years for a collision loss.
- Does my driving and claim history lead me to believe that I might go one or five years without this sort of loss?
It's a Good Life !
Dennis Volz Insurance Agency
10791 Jamacha Bl, Suite 1, Spring Valley, CA 91978
OFFICE: (619) 670-1000 - FAX: (619) 670-1121
eMail:Dennis@DennisVolzInsurance.com
Websites: Company Site: DennisVolzInsurance.com
This post contains only a general description of coverages and is not your insurance contract. Details of coverage or limits can vary. All coverages are determined by the terms, provisions, exclusions and conditions of your policy along with any endorsements.
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