Agents’ questions & answers

Agents’ questions & answers



Q The questions we receive most often in our agency are: “Should I title my child’s auto in his or her name to remove the risk of my being sued?” and “If I place the insurance also in the child’s name, does that remove the risk of my being sued?”

At what age is a child legally responsible for him/herself if the car is titled in his/her name?


Insurance Planning and Management, Inc.

Okawville, Illinois

Diana Kowatch, CPCU, AU, AAM, CPIW, with over 20 years’ experience in the insurance industry, is editor in chief of Technical and Educational Products for The Rough Notes Company, Inc. She provides the following response.

A The Rough Notes Company, Inc., is not a law firm and cannot provide legal advice, but I can provide some thoughts on this topic from an insurance perspective.

Most likely, titling a car in the name of a minor child will not absolve parents of liability for the acts of a child for whom they are legally responsible. The operation of a motor vehicle is a serious matter since substantial injury and damage can occur. Until the child becomes a legal adult or has been legally emancipated from his/her parents by a court, the parents can and probably will be held financially responsible for the acts of their minor child. Some jurisdictions require parental consent and proof of financial responsibility until the child is a legal adult even when the car is titled in the child’s name.

A Michigan legal ruling in May of 1996 set a precedent when it determined that the parents of a minor child who had committed property damage and burglary were financially responsible for the child’s acts. The acts occurred while the child was in his mid-teens. The actual legal fine assessed to the parents was a modest amount, but this has exposed the parents to civil suits by the victims for damages and compensation which could total thousands of dollars.

Placing insurance in the name of a minor child will probably drive up the cost of insurance and accomplish nothing in terms of legal standing. Insurance does not circumvent the law. The role of insurance is to offer financial protection when the events that occur are covered by the policy.

Q A fire at a local facility resulted in the release of a vapor cloud which forced the evacuation of area businesses and caused a total plant shutdown Under similar circumstances what factors should be considered during the investigation of a business interruption claim?

The following information is provided by Bob Burkholder, Esquire, who is a senior claims counsel for Environmental Claims Administrators, Inc., and was originally published in The ECA Claims Review.

A A business interruption claim arising from a forced shutdown as a result of a release of a vapor cloud can be quite significant. In order to address the issues which may arise as a result of a shutdown, we will initially discuss the general nature of a business interruption claim, which will lead into a broad discussion of the nature and handling of this type of claim.

A business interruption claim can be defined as a claim for damages sustained as a result of an event outside the control of the claimant which causes its business operations to cease for a period of time. Thus an event such as a fire must have actually caused a business stoppage. Second, the damage allegedly sustained as a result of the stoppage must be substantiated as having been reasonably caused by the stoppage. Such damages also must be adequately documented. This is critical because business interruption claims can be quite substantial.

Generally, the issue of causation will be resolved very early in the claims process. An investigation must be made to determine whether the stoppage was necessary in light of the release. For example, if the entity asserting a business interruption claim is outside of the area where evacuation was warranted, a defense to the claim asserting that the stoppage was unnecessary should be asserted.

In most releases of hazardous materials, however, a local agency will order an evacuation within the area threatened by the release. Faced with such an order, an entity is obligated to evacuate regardless of whether the release actually reached the premises. If an entity is outside of the evacuation area, it will need to be determined whether the decision to cease business operations and evacuate the area was reasonable under the circumstances.

Another question may arise where an entity has a warning system which is triggered by the release. In this case, it should be determined whether the warning system functioned properly. If so, it would appear that the evacuation was reasonable. If not, the evacuation caused by the “false” alarm may be the responsibility of the entity pressing the business interruption claim.

Also, a determination must be made regarding when it is safe to return to the area and resume business operations. In the case of the government order, the interval will likely be easy to establish because the evacuation order will be rescinded once it is decided that the danger has passed. In other situations, it must be determined when it is reasonable to return.

Once it is determined that a stoppage was justified, the difficult task of determining the measure of damages must begin. Is the entity entitled to net lost profit, labor costs, utility costs, lost business opportunities, etc.? The answers to these questions may vary significantly depending upon the nature of the business, on whether the entity can “recapture” the lost production, and what the particular jurisdiction allows as a measure of damages for business interruption. Further, proof of damages through documentation can be difficult where a complex process and/or industrial secret may be involved.

First, receipt of a claim for damages sustained as a result of business interruption should be answered by a request for documents supporting the claim. The request should be as detailed as possible. For example, a request for documentation should include information pertaining to the general type of claim being asserted, a summary of various loss items, a general breakdown of subitems into cost components, and documentation supporting each cost figure.

In addition, it must be ascertained whether the facility operates on a 24-hour basis so that it can be determined whether the lost production can be recovered. In addition, documents comparing production figures for previous months and even prior years may be necessary. Finally, information regarding the portion of the alleged damages representing net lost profit should be ascertained.

Upon receipt of the request for information, a review of the documents may reveal inconsistencies. Also, whether the proof of damages coincides with the time span of the interruption must be verified. Initial review should also be designed to determine what additional information, if any, may be necessary. Often, an entity will accept an offer for that portion of business interruption damages which can currently be justified rather than continue in an effort to supply additional documentation, either because of the time involved in preparing a response or because the information is an industrial secret. Further, the nature of the information submitted may require an evaluation by an expert in the industry and/or an accountant.

As can be seen in the limited preceding discussion, business interruption claims are rarely “cut and dry.” In addition, the damages alleged are often fairly substantial. Consequently, it is crucial to have an experienced, professional claims handler investigate business interruption claims when they occur.

Copyright Rough Notes Co., Inc. Sep 1996

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