Insurance, post-sale of vehicle

Richard53

There has been some discussion of this on here recently, and I saw this today:

http://britishbikersassociation.org/blog/entry/scots-biker-in-insurance-hell-after-legal-loophole-forces-him-to-pay-thousands-for-death-crash-on-his-old-bike

Basically, man sells motorcycle to another rider, who takes it away on a truck. Man forgets to cancel insurance policy on bike. Four days later, new owner is killed on the bike. As he was banned from driving at the time and had no insurance of his own, original owner's insurers have to pay all the costs of the accident and come after the original owner to recover the costs, amounting to several thousand pounds. Seller is deemed to have given the banned rider 'permission' to ride the bike.

I don't know how accurate the reported details are, whether this is Scottish law, or what. But it seems incredibly harsh. The advice seems to be, if you sell a vehicle, cancel your insurance policy immediately, within minutes of the sale.

dacouch

Richard53 wrote: »

There has been some discussion of this on here recently, and I saw this today:

http://britishbikersassociation.org/blog/entry/scots-biker-in-insurance-hell-after-legal-loophole-forces-him-to-pay-thousands-for-death-crash-on-his-old-bike

Basically, man sells motorcycle to another rider, who takes it away on a truck. Man forgets to cancel insurance policy on bike. Four days later, new owner is killed on the bike. As he was banned from driving at the time and had no insurance of his own, original owner's insurers have to pay all the costs of the accident and come after the original owner to recover the costs, amounting to several thousand pounds. Seller is deemed to have given the banned rider 'permission' to ride the bike.

I don't know how accurate the reported details are, whether this is Scottish law, or what. But it seems incredibly harsh. The advice seems to be, if you sell a vehicle, cancel your insurance policy immediately, within minutes of the sale.

If this is not the same story there was a similar story last year about a biker in the same position.

The previous owner is not deemed to have given him permission to drive. The Road Traffic Act makes the issuer of a current certificate eg the previous owners Insurer liable for fault accidents if the driver or rider has a "Judgement" obtained against them. The reality this is just if the driver / rider is identified.

Motor Policies contain a clause stipulating the Insurer can recover costs they would not have had to pay had the law eg the RTA required them to. This enables them to pursue their own client for the costs they have had to pay out due to their client not cancelling their policy.

It's why anyone who understands Insurance will recommend you cancel your policy rather than leave it running to avoid a cancellation charge. Where as others recommend you leave it running to avoid the cancellation charge with your link being the possible consequences

forgotmyname

Save that link for everyone that says their cancellation charges are more than the policy.

Its rare but its a risk.

facade

The requirement comes from The road Traffic Act 1988 part 151 section 2b.


You would think that a cancellation would be free, as you are doing the Insurer a big favour by allowing them to wriggle out of any payout. Yes they can pursue you for the money, but if the car derailed a train-full of nuns into the path of a another high speed train filled with baskets of kittens, they would never recover all that they paid out.

colino

Unfortunately this needs challenged by someone with deeper pockets. Once you have sold the vehicle, what insurable loss does the previous owner have? In just the same way if the white caps stopped someone who had bought a vehicle from an honest seller, but the new buyer hadn't bothered to insure it, do you think they would send him merrily on his way because someone, somewhere had paid a policy for it? Of course not, he would be done for driving with no insurance.

Richard53

There has been some discussion of this on another forum I read. It is, of course, entirely possible that the owner of the bike lent it to a mate, who went and killed himself on it, and the story of the bike being sold to him came later. I'm not saying that is what happened, but the insurance company may be reading it that way.

It looks as though the only way to be safe here is to phone and cancel the policy before the buyer has even left your premises. I have often sold a bike or car and left the policy running a few days until I got fixed up with a new one, and then just done a transfer over the phone. Maybe I will have to rethink that approach. There doesn't appear to be any grace period.

facade

colino wrote: »

Once you have sold the vehicle, what insurable loss does the previous owner have?

None, whatsoever.

But the insurance company has a third party liability because a policy is in force on the vehicle.

One of their terms may be that you have to own it, in which case they can void the policy, but they cannot backdate the void (except if you blatantly lie at inception, then there is provision for the policy to be declared never to have existed.) so until they know that you don't own it, they cannot void it, and you didn't cancel it either, so under the RTA, they are liable for the third party losses.

There is some small print somewhere that says if you make them pay out when they didn't have to, they can recover the pay out from you.

E.g. you deliberately collide with someone, you deliberately render yourself incapable of driving by consuming alcohol or drugs and then have an accident.
And in this case, you leave them to carry the can under the RTA because you couldn't be bothered 'phoning or emailing them.


Now I think there might be some mileage in refusing to pay the cancellation fee and that is one for the solicitors.

AdrianC

OK, let's say this rule doesn't apply.

Mr X lends his bike to somebody else, who he knows to be banned and uninsured. That friend promptly smears himself all over the scenery. Mr X then says "No, nothing to do with me - look, I've got a copy of the receipt he gave me when he bought it a few weeks ago..." <hasty scribble>

No, I'm not saying that's what happened here - but it explains exactly why this rule is in place.

InsideInsurance

Richard53 wrote: »

Basically, man sells motorcycle to another rider, who takes it away on a truck. Man forgets to cancel insurance policy on bike. Four days later, new owner is killed on the bike. As he was banned from driving at the time and had no insurance of his own, original owner's insurers have to pay all the costs of the accident and come after the original owner to recover the costs, amounting to several thousand pounds. Seller is deemed to have given the banned rider 'permission' to ride the bike.

The story isnt well written

The only costs the insurer would have to cover is the third party liability towards, in this case from the photo, the Toyota car and its occupants. There is no cover for the bike itself nor its now deceased rider.

The RTA would allow the insurer to attempt to recover their outlay either from the driver at the time or their policyholder. Similarly their contract of insurance would give them right of recover from the policyholder.

Normally as the relationship exists with the policyholder its favourable to attempt the recovery from them.

If you dont want to run these risks then (a) always cancel/ change your insurance as soon as you've sold/ disposed of a vehicle and (b) always make sure you are certain anyone that you allow to drive you vehicle is allowed to do so and properly insured

I've had a few family/ friends who've wanted to drive my car and claim they have DOC cover on their own policy so can do so but theres no way I'd just take their word for it (nor allow them to drive it on a TPO basis anyway)

Quentin

InsideInsurance wrote: »

I've had a few family/ friends who've wanted to drive my car and claim they have DOC cover on their own policy so can do so but theres no way I'd just take their word for it .....

Although OT, but is there anyway to "prove it"?


(I would be happy to let prospective buyers test drive a car for sale but cannot see how they can prove their DOC (a cert being unreliable)

InsideInsurance

Quentin wrote: »

Although OT, but is there anyway to "prove it"?


(I would be happy to let prospective buyers test drive a car for sale but cannot see how they can prove their DOC (a cert being unreliable)

Never a way to be 1000% certain.

The most secure way would be to call the insurer (so you know that it is the insurer on the phone) and listen into a call between them and the friend/ prospective buyer etc confirming that the policy is in good standing/ no indemnity issues and that the Driving Other Cars does apply to the proposed driver.

There is still an outside chance that the advice on the phone could be wrong but that would be an issue between them and their insurer as you would have no contractual relationship with the insurer to make a complaint over it so it could get messy though hopefully this would be dealt with between the two insurers and them having grown up conversations.