The R1.3 Million Carwash

If you take your car to the car wash—as many of us do—you may find the article from News24, linked below, quite eye-opening and even a bit unsettling. It brings to light a potential risk that might not be on most people’s radar.

Our take on the article follows below:

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Our View

While we acknowledge that insurers are legally correct in rejecting this claim based on the policy wording, we believe there is potential for improving the way these exclusions are applied. The inclusion of "or any other person" in these clauses places an unfair burden on clients who are paying comprehensive premiums for their insured assets. When clients purchase comprehensive motor insurance, isn’t it reasonable for them to expect coverage for situations like this, particularly when the fraud occurred while the property was entrusted to a third party? 

As brokers, we believe insurers should consider removing the “or any other person” clause from these exclusions, possibly offering it as an optional extension or at an additional premium. This approach could serve two key purposes: first, it would allow for proper discussion and underwriting of the issue before a loss happens, and second, it would enable insurers to set more sustainable risk premiums for this extension, informed by empirical data from incidents involving fraud and similar events. Ultimately, insurance should never be a “zero-sum game.”

In cases like Caroline's, where we believe she acted responsibly by using what appeared to be a legitimate service provider, the insurer could have paid her claim and then pursued recovery from the negligent party (in this case, the carwash). Had that been the approach, we wouldn’t be discussing this issue today.

This perspective aligns with client expectations and reflects what we believe comprehensive motor insurance should cover. However, we want to stress that our viewpoint is somewhat anecdotal, as a thorough review of the full policy wording, policy schedule, and specific circumstances would be necessary to offer a definitive opinion.

What If the Car Wash Had No Insurance?

Another important issue to consider is what happens if the car wash has no liability insurance, or if their insurer rejects their claim. In such cases:

• Your  insurer would still reject the claim based on the trickery clause.
• You would then have no choice but to sue the car wash directly, which could result in a lengthy legal battle, substantial legal costs, and a case that you may ultimately lose.

This scenario underscores the importance of:

• Verifying that any service provider you entrust with your property has adequate liability insurance.
• Consulting with a professional risk advisor, who can not only advocate for you in situations like this but also help ensure you have the best insurance coverage for your specific risks. A risk advisor will also highlight key exceptions in your policy, helping you make a fully informed decision when choosing insurance.

Understanding Your Policy

Never assume that comprehensive motor insurance will coverall your losses—the reality is, no insurance policy covers everything. It’s essential that you fully understand your insurance policy.

At a minimum, you should always familiarize yourself with:

1. Insured  Events: The specific circumstances that are covered.
2. Exclusions or Exceptions: What is explicitly not covered (such as a trickery clause).
3. General Conditions: The requirements and conditions that must be met for coverage to apply.

A qualified risk advisor can help you navigate these complexities by highlighting critical clauses and explaining their implications. However, even the most skilled risk advisor cannot replace your responsibility as a client to ask the right questions and take the time to read and understand your policy.

The Bottom Line

Entrusting your vehicle, or any valuable asset, to service providers carries inherent risks that require careful consideration.

To protect yourself:

• Always verify that custodian service providers have adequate liability insurance.
• Whenever possible, choose service providers with a proven track record, a solid reputation for treating customers fairly, and sound risk management practices.
• Read disclaimers and fine print carefully.
• Fully understand your own insurance policy’s exclusions and conditions.

By taking proactive steps and working with a professional risk advisor, you can minimize risks and ensure you're properly protected against unforeseen losses.

Ultimately, understanding your policy and dealing with reputable service providers who have adequate liability insurance coverage is your best safeguard against costly surprises.

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