Over the years, I’ve responded to requests from agents whose customers have had claims denied under auto policies, with the “wear and tear” and/or “mechanical breakdown” exclusions being cited. For example:
- Water in the fuel tank damaged the engine
- Travel trailer flooring damaged due to freezing
- Wiring harness caught fire and damaged fuel pump
- Radiator leak damaged engine
- Air cleaner came loose and dirt entered and caused engine damage
- Rubber from a tire blowout damaged a fender, hood and firewall
Most recently, I became aware of a claim involving water damage to the interior of an auto as a result of heavy rain that was able to seep through sun roof seals that were damaged by clogged drains. The adjuster cited the aforementioned exclusions, along with “no regular maintenance.” The carrier used the 2005 ISO PAP.
First of all, the ISO PAP has no exclusion for “no regular maintenance.” There is nothing in the policy that mandates that an insured maintain anything at all. The closest thing might be the requirement to take reasonable and appropriate action to prevent further loss.
Second, with regard to wear and tear and mechanical breakdown, this is what the ISO PAP says:
2. Damage due and confined to:
a. Wear and tear;
b. Freezing;
c. Mechanical or electrical breakdown or failure; or
d. Road damage to tires.
This Exclusion (2.) does not apply if the damage results from the total theft of “your covered auto” or any “non-owned auto”.
Notice the “and confined to” language. The exclusion applies only to the actual property that is worn or torn, not to ensuing loss. IF the seals were worn out, there would be no coverage for the seals, but the ensuing water damage would be covered.
Given the number of such improper claim denials over the years that I’ve personally seen, there are likely many thousands of legitimate claims that went unpaid. This is another area where an agent earns his or her commission…by advocating for the customer. But to do that, you have to know what the policy does and doesn’t cover. The only way to know that is by self-directed learning and choosing quality CE, not what all too often passes for “education” today.
Photo by CJS*64 
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Bill Wilson
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Bill,
Got a call this AM from insured that had by accident added gas to his diesel engine. He has an ISO PAP policy. I may have told him wrong but I said no coverage. I hope that is correct. I told him if it involved VMM would have coverage. Ford dealer said they got an insurance check from a customer’s insurance company for water in the diesel bought at a service station. Shop man said he didn’t know what his customer told the insurance company to get a check.
What do you think.
Assuming an ISO PAP, I don’t see an exclusion. There is a very detailed article on the Big “I” Virtual University written by Mike Edwards, CPCU on this:
http://www.independentagent.com/Education/VU/Insurance/Personal-Lines/Auto/Physical-Damage/EdwardsFuel.aspx
From an E&O standpoint, I’d NEVER tell an insured their policy doesn’t cover a loss. I’d report it. In this case, unless there is something unusual in the policy language, it is likely covered.
Most of the claims denoied appear to me to be covered if presented corretcly. For instance there is all risk protection under comprehensive subject to limiatations. The grant of coverage includes all parts of teh vehicle other than that particular part that has a wear and tear type event. Reminds me of garage broad form pd coverage
Thanks again Bill – I look forward to reading, and learning, from your real-world experience. I’m currently reading When Words Collide. I recommend this to everyone in the insurance industry across the U.S.
The denial of an unwarranted claim wear and tear is a correct procedure. Because under the International Accounting Standards, already the provision is there to deduct the wear and tear from the profit of the company under the heading depreciation and proportionately deducted under the Corporate Income tax. Hence again if we allow this leads to double benefits. But given benefits for the individual claim is no harm since we are paying the higher insurance premium to our vehicles and there is no proportionate claim from the users, hence allowing the claim for wear and tear for the individual vehicle is just and proper.
Yesterday I got an inquiry from an agent with an almost identical sunroof claim involving blocked drains. I believe ISO PAP language clearly covers such claims absent any delay in reporting known damage by the insured. I suspect the adjuster in this claim recognized that, so his tact was to say that the insuring agreement was not triggered due to a lack of “direct” and “accidental” damage. Once this claim has been resolved, I’ll blog separately about it.