Motor vehicle claims are typically lodged following collisions involving other motor vehicles. However, insurers are now seeing a rise in motor vehicle claims being lodged in circumstances where the insured vehicle has collided into a shopfront. Whilst a range of factors cause these types of collisions to occur, their increasing prevalence, complexity and high quantum requires motor vehicle insurers to have a greater understanding of who can make demands, the heads of damage claimable and the appropriate methods for assessing the quantum of these claims.
WHO CAN MAKE DEMANDS?
Retail businesses will often operate out of commercial premises which have been leased for business purposes. When a motor vehicle collision causes damage to a premise of this kind, claims can arise from multiple parties who have been affected. This includes the registered proprietor of the premises (i.e. the owner) and any business that operates out of the premises under a lease agreement.
When it comes to repairs and maintenance of a retail premises, the responsibilities of the landlord and tenant can be found in State/Territory-specific legislation and within the terms of the lease agreement. Whilst each must be considered, they are unlikely to prevent a landlord, tenant or their insurers from ultimately pursuing the loss from the driver who caused the collision (and subsequently that driver’s insurer). This can occur even if the landlord or tenant have facilitated the repairs or put in place measures to mitigate the loss in the interim.
POTENTIAL HEADS OF DAMAGE
Damages to a property can be extensive and the monetary costs to reinstate any property or business owner to the position they were in prior to the collision occurring are usually significant. Commonly the loss extends beyond the physical damage caused. For instance, where the damage caused affects the operation of a business, the financial loss can remain ongoing until the repairs to the property have been completed. Whether the claim is made from the property or business owner, it is important for insurers to be aware of the common heads of damages that can potentially be claimed. These can include:
- Physical damage to the property itself
- Damage to or loss of inventory/store goods
- Physical damage to the tenant’s fit out of property
- Business contents including equipment and machinery
- Loss of income
- Compensation for employee wages
- Loss of goodwill
- Mortgage, rent and lease payments
- Emergency/make safe works and call out fees
- Assessment and loss adjuster fees
- Relocation costs (if required) to move to new or temporary premises
METHODS OF ASSESSING THE DAMAGE
These types of collisions can attract high quantum claims. It is therefore critical that motor vehicle insurers adopt the appropriate methods for assessing the different types of loss as they can in turn offer a compensatory benchmark for insurers and qualify as evidence in court when a claim becomes litigated.
The most common method of assessing physical damage to a property is to have a builder or loss adjuster prepare a scope of works to identify what building repair works are required. This may also be followed by the provision of quotes from builders or contractors to complete the rectification works. These steps will assist insurers in being able to evaluate whether demands for rectification works are fair and reasonable and in turn help facilitate any settlement negotiations with a third party.
For loss of income claims, the first step is demanding all financial records relevant to the assessment of earnings. For a business this can include profit and loss statements, tax returns and the like. A forensic accountant can be engaged to analyse the financial records of the affected party. Forensic accountants may also assist in the financial quantification of the goodwill and reputation of businesses, as well as ruling out any fraudulent claims.
Often when business operations have been affected, operating costs will continue to exist including rent and mortgage repayments. Documents including lease agreements and mortgage agreements need to be obtained to verify these costs.
It is important to keep in mind that an affected party may be uninsured and therefore the value of some losses may continue to increase until reinstated by the at fault party. Identifying these losses early is essential as there may be steps the motor vehicle insurer can take to mitigate the loss, such as making a part payment. This should be balanced against the ability of the affected party to mitigate the loss, which should also be considered.
Finally, whether a legal basis exists to pay each head of damage will depend on the circumstances of each collision. Whilst the general position at common law is that a negligent party will be liable for the loss and damage caused to the innocent party, liability may be reduced if there has been contributory negligence or in the situation of an inevitable accident. Of course, the circumstances which give rise to a shop front collision can sometimes be complex. Insurers should therefore contact their legal advisors if indemnity under a policy is required to be reviewed.
Should you require any assistance with these types of motor claims, please contact Lucia Cocco on (03) 9947 4580, Doran Yacobi on (03) 9947 4504, or any member of our team.