MOTOR INSURANCE

MOTOR INSURANCE

An insured parked his car at a street alongside a row of eating stalls. After finishing his supper, he found his car splashed with acid all over. He made a Police report and then sent his car to an insurer's approved workshop for repairs. The car was resprayed only four months ago.

Question: (1) The car is seven years old. The workshop would have to strip the whole car of acid and old paint before respraying. The total cost is about RM4,000/-. Would betterment apply? (2) Would the claim be payable under a Private Car Comprehensive policy?

Let's hear some comments.

• Yam Lim Song My humble view to the 2 questions posed in the case study:-
  
  1. Betterment or depreciation for a better choice of terminology used, is not applicable since the roof of the car was merely re sprayed with a new coat of paint and not replaced
  
  2. Claim is payable unless malicious act is an exclusion in the policy(which is not)
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  Chan Chee Kong 1) Payable if extended to cover Malicious Damage 2) No betterment as no parts involved
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  Charly Lim Hmm....how can we ascertain its malicious act?
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  Ham Kwang Chan The incident souns like malicious act. If yes, the claim is payable as malicious act is an standard cover under comprehensive cover section 1 of Malaysian Motor Tarif. Betterment should not be apply should there is no replacement of parts required.
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  Raymond Huang Contribution for betterment can be applied to paintwork if respraying will result in the car looking good which but for the damage would remain dull looking. The insured has gained an advantage as a result of respraying. In the case study, betterment will not apply as the car had only been resprayed 4 months ago. The claim is payable as malicious damage is covered by the policy.
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  Ong Chun Keat Another scenario. If the car was parked within the vicinity of Bersih rally and suffered same damage. Would it be fall under SRCC exclusion?
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  Raymond Huang No. There was no riot or civil commotion at the time of the rally. Loss falls under malicious damage.
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  Ong Chun Keat Was it not classified as strike?
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  Raymond Huang OCK - Not a strike. Only a peaceful gathering. Does not come within SRCC.
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  Richard Foong Malicious damage is covered under the motor policy. Since insured do not know the cause of splashing the acid, insurers should give the insured the benefit of doubt and allow the claim to proceed. On whether betterment can be applied on spray painting, it is silence cos they only specified if franchise parts are used, betterment will be applied in accordance with the age of the vehicle. There is also no mentioned on used parts for betterment to apply. Hope I am right, sifu
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  Stewart Sia no claim allow, this is not an accident/
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  Raymond Huang Stewart - please explain your answer.
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  Tharma Lingam Ans 1. The restoration of the paintwork does not result in any betterment. The terminology refers to a replacement of a higher performing or higher specification part or component. The restoration of the paintwork will neither raise the market value of the car nor enhance its performance. 
  
  Ans 2. If malicious damage is a specified peril, then policy liability should attach. ...See More
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  Chia Yun Khim Looked as if none of us has noted the importance or relevance of that fact of the case ' The car was resprayed ONLY four months ago ' which was the determining fact for the applicability or not of betterment for the respraying; irrelevant or unnecessary facts would not find their way into Mr Raymond Huang's posts, haha....
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  Stephen Ngui Answer no. 1..depreciation will only be applicable on new for old replacement parts (5 year old onwards ref PIAM scale)but not on general labour n spray painting charges
  
  Answer no.2..this splashing of acid falls under malicious act which is covered under d policy subject to policy OD excess...unless it is a riot like lowyat which would then be questionable...
  
  Just muah humble 2 cents opinion, cheers
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  Raymond Huang 'Betterment' may not be a good term to use. Some say a more appropriate term should be ' deduction for depreciation' or 'deduction for wear and tear'. I would like to suggest 'contribution by insured for improvement'. How does it sound? I maintain my stand that 'contribution by insured for improvement' should only apply to 'wear' parts and not to 'crash' parts.
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  Tharma Lingam Hi Raymond Huang, I doubt when a car gets a new coat of paint, it can be accounted to improvement. You mean, the car can go faster? The car can have better road-holding? What advantage is the insured gaining?
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  Raymond Huang When a new coat of paint is applied, the appearance of the car improves compared to the dull look before the accident. It is not the performance I am talking about. The market value may also improve. There is an advantage to the insured which must be accounted for by way of contribution. The principle of indemnity is adhered to with the application of contribution for improvement. This is my view and TL you need not agree with me.
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  Tharma Lingam No bro, the principles of insurance has been mutilated a little in terms of Betterment in Malaysia. Kindly refer to overseas interpretation and betterment may spring a new meaning.
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  Tharma Lingam Kindly refer to how claims are handled overseas, where insurance was found and developed. Try and follow the competent path. Not the path that BNM and the Malaysian Industry has convoluted the terminology. Betterment should not be applicable in motor insurance.
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  Tharma Lingam Does anyone know the meaning of betterment? I am talking off-market, of course. The Malaysian market on motor claims is controlled not by principles of insurance but by govt decree, intervention. By some people who who do not understand insurance, indemnity and even dignity. Betterment is not a condition to mess the insured...cheers
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  Tharma Lingam Raymond HuangRaymond, do you remember that the car had been painted 4 months earlier? How can you keep talking about betterment? I have a 10 yr old car and I don't think it deserves any new coat of paint because I have been polishing it and waxing it regularly. I don't need any insurer to teach me to maintain my car. When someone pours acid over my car and the insurer talks about betterment, they will receive my lawyer's letter. Don't you insurers play such lowly games with the insuring public. Understand? Don't be low class.
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  Tharma Lingam Haha, if I applied betterment on all the franchise cars that my company surveys, I will be out of business la. No offence intended all bros. Cheers
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  Raymond Huang Tharma Lingam - Thank you for sharing your thoughts. You sound very unhappy with betterment. This is understandable. Betterment is a corollary of the principle of indemnity and cannot be avoided. I think betterment could be managed in a more effective manner so as to accord fairness to the policyholders depending on the merits of each case and not applied wholesale. The idea is to ensure that no policyholder is placed in a position of advantage after repairs to the car are carried out. Please do not add to this comment otherwise there will be no end to the debate.
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  Richard Foong I just have a discussion with adjusters on the application of betterment. If it is a recon. or rebuilt or used veh. betterment will be apply by taking the year of make less the year of accident and the applicable % will be applied as allowed by the policy. For new car, date of registration minus date of accident to arrive at the age if the veh. for betterment to be applied or not applicable. In this particular case, how much betterment to apply would depend on the discretion of the insurers. But one thing insurers must bear in mind the veh have just been resprayed. The insured must proved to the insurers. Further, if insurers do not adopt betterment, insured would be receiving more than the true indemnity. It may add value to the veh. with some extra dollar. It is like old for new. Hope I am right.
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  Tharma Lingam to Richard Foong : good that you have taken the interest to check the matter with adjusters.
  
  First and foremost there is a distinction between depreciation and betterment.
  
  In layman terms, depreciation refers to Usage, wear and tear. The gradual reduction in residual value or remaining life-expectancy of a part or component. Eg. A tyre is put to road use and in about one and a half years it expires or is fully worn. The depreciation rate of a tyre is high, therefore. A windscreen glass, on the other hand, is not subject to the same rate of depreciation. It may withstand time for 100 years and will be useable unless broken. Traditionally, in decades past, depreciation for tyres, batteries and some other heavily depreciating parts were subject to the deduction of a sum for wear and tear. This is depreciation.
  
  Betterment in adjusting terminology means a part or component of a superior type has been incorporated in the repair exercise. Eg. Instead of replacing tyres of 195/16 spec, tyres of 225/16 were installed. The replacement tyres logically would be more costly, performance-enhancing and result in 'betterment'. Adjusters would normally deduct the added cost in the replacement tyres in order to ensure that the insured was not benefitting out of the repairs.
  
  In the present motor claims market, with its straight-jacket systemisation, paintwork is not subject to any depreciation or betterment. 
  
  Though the discussions here do make sense, when the depreciation is nominal, then no allowance is taken to reduce the restoration cost of paintwork.
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  Richard Foong TL. If I am correct, betterment is similar to the reinstatement for Machinery ie. If the replacement on the new machinery have better features than the old, betterment would be applied upon confirmation from the vendors on its superiority. In this betterment are being used in the correct manner. However for motor, what superior features are there other than getting replacement parts. If the parts are new, in all fairness betterment may use otherwise insured getting an improvement outlook on his car. But most of the cases the insurers offer used parts and less betterment which is unreasonable and insured have to pay the difference. I understand the claims system will automatically calculate the betterment when the claim is registered and estimate of repair on the parts price are updated. The policy only mentioned betterment are applicable on franchise parts. 
  Some suggested to avoid confusion, depreciation should be used instead betterment. However there are vast difference in meaning between these two words and may lead to more confusion and dispute later on. What you defined are correct which I tend to concur with you.