An agent contacted me recently about a denied claim under a 2011 ISO HO 00 06 condo form. The named insured’s $3,000 e-bike was stolen and the carrier denied the claim, citing the “motor vehicle” exclusion. The question was whether a pedal-assist e-bike is a “motor vehicle.”
The policy defines “motor vehicle” to be a “self-propelled” vehicle. To me, that means a full-throttle vehicle, not one that can be pedaled. A car is a motor vehicle…it won’t run unless the motor is engaged. A riding mower is a motor vehicle and can’t be operated without the motor running. A motorcycle also can’t serve as a vehicle to transport persons or property unless the motor is used. This e-bike can be operated without engaging the motor.
If the e-bike can be operated under pedal power or via motor-assisted pedaling, then I don’t believe it’s a “motor vehicle” as that term is generally considered or intended under the policy language. Of course, I could be wrong, but at least there’s an argument for ambiguity and the insured usually wins such argument.
But, given that March is Ethics Awareness Week for the insurance industry, there is another angle to the claim denial. The correspondence from the insurer included this statement: “If you’d like us to consider an agency accommodation to make a one-time exception for this loss, please let me know.”
I don’t have a problem with agency accommodations per se, but I do if such claim payments come from claim reserves. I believe that claim reserves should be used only to pay COVERED claims. If the carrier doesn’t believe the claim is covered but is willing to pay it, that payment should come from another account, maybe a charitable one.
I’m not sure if this is an ethical issue or a regulatory one. The insurer would be doing something nice for THIS insured, but what about others that don’t get an “accommodation”? Is this discriminatory though well-intended?
What do you think? Feel free to give your opinion in the Comments below.
P.S. If you’d like to read an article about e-bikes and insurance, check out this one from coverage expert David Thompson:
What You Need to Know About E-Bikes! (johnsonstrategiesllc.com)
Bill Wilson
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Perhaps the times that an insured does not get paid when a carrier incorrectly denies coverage for a claim will more than offset the expense paid out of the reserves bucket for the few times an accommodation is made. Or, if the carrier did make an accommodation payment for what they say is not a covered claim, is that amount then deducted from the agency’s contingency award? Ethics is not always common sense.
Perhaps, given the imperfections in the system.
I think that sounds grossly unfair to pay that claim. The policy contract either gives coverage or it doesn’t. Once they pay an e-bike claim once, I would think that would be setting a precedent to pay again and again, It’s too bad the insurer isn’t up to speed with offering coverage on home policies for e-bikes. Most of the carriers I’ve worked with have worked out, in the past two years, how to provide automatic coverage for e-bikes under the home policy. However, a few carriers offer e-bike coverage on a separate motorcycle-type policy. Perhaps these carriers elect to exclude them on the home policy as they feel they are a better fit on a separate policy? I’m glad we have the option of the separate policy as I can make sure to offer medical payments and un/underinsured motorist. I think an e-bike is probably best insured on its own policy, especially if it’s a daily or frequent rider.
Aside from whether or not such payments should be drawn from reserves, this situation could invite ethical and regulatory headaches. Ethical in the sense that the scenario suggests inconsistency in decision-making and “making an exception.” It may also be a regulatory market conduct issue. If certain claims are waved through and paid—with a wink and a nod—due to a customer or agency accommodation, it could represent the disparate treatment of policyholders.
I can’t tell you how often I’ve seen an insurance broker or underwriter pressure an adjuster to soften or recant a coverage stance because the insurance company garnered significant business from the broker or the account was a large premium payer. To paraphrase Leona Helmsley, do policy language and Exclusions only apply “to the little people”?
One policyholder gets an accommodation because it is influential, a large account, uses a broker that generates lots of business for the insurer. Another policyholder gets no accommodation because it lacks the same clout. Is that truly fair?
In bad faith claim litigation, plaintiffs (via discovery) will seek documentation as to how the insurer has handled similar claims. (Whether or not the insurer successfully defeats such discovery is a side issue.) However, suppose the plaintiff can show that the insurer denies coverage for one claim but pays some claims with similar or identical circumstances. That inconsistency is problematic from a market conduct and bad faith standpoint.
If the carrier has consistently handled non-covered claims this way then the claims reserves would already have them included via the actuarial calculation of IBNR. Moving them out of claims into another category (I’d suggest “Marketing”) would require the actuary to take previous payments out of the triangles and re-calculate without them.
It’s probably do-able, but is it worth the effort?
If anything, they should call it a customer accommodation rather than agency accommodation. But I struggle with this being an accommodation unless they can give policy language that excludes coverage in detail. Bikes are covered for theft; the question is if this is a bike or a vehicle. The agency did nothing wrong, so I struggle with agency accommodation. Does it benefit the agency to have a happy customer, sure. But how many of these are they going to accommodate before they do add exclusionary language or an endorsement to coverage this specific item. Does it benefit the carrier to have a happy customer? If it should be covered pay it, if it should not be covered then deny it. If it is ambiguous then PAY IT. I don’t want to have this conversation with the next customer that does NOT get an accommodation. Interesting that Progressive just released a new E-bike program, written under their motorcycle program and they cover full power and pedal assist.
Excellent question, as usual, Bill. This whole E-Bike Dilemma is rife with problems. Companies open a Pandora’s box and may establish precedent by paying claims out of their normal claims reserve funds for these “agent exception” losses. Your point about using some sort of benevolence fund might help insulate them from “precedent-setting.”
I recently dug into this topic on a recent blog post I wrote and posted on our agency website, I learned that the Feds classify these bikes differently based on how they apply power.
I wonder if that is germane to this discussion. I would welcome your critique of our blog post and its relevance to this topic. Feel free to “beat it up”!
Thank you for all your excellent work on this front!
I have an e-bike and always felt is not a motorized vehicle but felt a claim would be denied. It would be unethical and might violate state insurance law on paying a claim for one agency based truly on who the agency is
Why wouldn’t the following provision provide for coverage, since this appears to be set forth as a disjunctive?
(2) We do cover “motor vehicles” not required to be registered for use on public
roads or property which are:
(a) Used solely to service an “insured’s”
residence; or
(b) Designed to assist the handicapped
I am assuming that an e-bike is not required to be registered. if they are, stop reading. It seems to me that there is coverage if:
1. the vehicle need not be registered for use on a public road, or
2. the vehicle need not be registered as it is used to service the insured’s residence, or
3. the vehicle is designed to assist the handicapped.
it is hard to imagine a public road servicing a private residence, negating a reading that these provisions are written as a conjunctive. I don’t read this as requiring that the e-bike must be used either to service property of to assist the handicapped. Hence, the first description, that the vehicle need not be registered for use on a public road triggers coverage.
When I was a young adjuster at INA and dinosaurs roamed the earth, the claims manger had a fund that he used to pay claims of clients of agents that brought a large amount of profitable business to the company and lobbied for payments to their clients. In the old days bad faith did not exist and the thought of unbalanced payments did not exist. They were relatively small claims, although I do remember paying for a horse barn that had burned down and for some reason INA had refused payment. Being young and I did not question this procedure. Unfortunately, in today’s litigious environment no good deed goes unpunished.
Stan, as also a child of the Pre-Cambrian era, I remember those days and heard stories about similar things. I often have told the tale of a farmer whose barn burned down in the 1950s. His agent had failed to schedule the structure on his farm policy. The loss was $5,000 which doesn’t sound like much, but it was back then. Today, there would be a claim denial by the carrier and ultimately recovery under the agent’s E&O policy. That’s not what happened in this case. The agent represented 5 farm insurers. The insurer on the account made a call to the branch managers of the 4 other carriers and suggested they each chip in $1,000 to pay the claim “so their agent wouldn’t be embarrassed in his community.” I suspect this would be a highly unlikely outcome of such a loss today.