Collector Car Insurance

I’m a member of several vintage car forums and one of the topics that comes up time and again is insurance.  It's always a problem for someone!  Hagerty, Taylor, State Farm . . . each company has its promoters and detractors.  When there are complaints, many center on cancellations or rate increases.

I’m not defending or attacking any company, but I’d like to offer these thoughts:

First, we buy insurance from collector car carriers primarily because it’s cheaper, and also because we can then insure our cars for their true value as opposed to some arbitrarily determined book value.  In most states, an antique policy is a lot less money even as it provides potentially superior benefits. Where I am – in Massachusetts – a collector policy for a $75,000 vintage Rolls might cost $500 a year, where regular insurance on the same car could be $2,500.

The rates are lower because the risk of damage is presumed lower than that for a car that’s driven daily.  It should not come as a surprise that the companies monitor claims activity closely, and cancel or raise rates if an insured does not fit the low usage/low risk profile.  That could happen because of multiple small claims, miles driven being higher than expected, or a number of other factors.

You might say that buying collector car insurance at low rates is a privilege, not a right.  We may be excluded from that market by our actions, which may include tickets, poor credit history, excessive losses, convictions for fraud, or other factors.  If we are excluded by one company, we may be accepted by another. If no collector company will take us, we must buy insurance in the regular market, at market rates.

Another way to look at it is this: If we want to get the savings (and often increased potential benefits) of a collector policy, we must strive to fit the model of "low risk insured" that those companies court. With the proliferation of Big Data and the Internet, we have to do an every better job to fit this profile.

We should recognize that all insurers share information on claims made, claims paid, and also our pattern of payment and credit history.  For those who object to credit history being a determinant of insurability I’d refer you to the economists at Fair Isaac who have written some interesting papers describing how complex patterns in demographic and credit data predict insurance losses.  Whether you believe that or not – the insurers believe it, and act accordingly.  So it’s good to be aware.

The next reason we choose collector car insurance is that they generally pay for repairs at restoration shops, not state licensed body shops, often at rates well above those set by state insurance commissioners for regular insurance auto repair.  It’s a surprise to many that the state is involved in labor rate setting, but they are.  Those rates work for a fender bender on a two year old Ford but they won't cover the kind of craft workers you need for the same mishap on a '34 Packard.

From our owner/enthusiast's perspective, those are the things we want to protect our collector cars.  We want a lesser insurance cost, because we don’t drive our vintage cars much.  If we have several, we can only run one at a time.  And we want the ability to have it fixed right, if there is a mishap.

From the insurer’s perspective, there is a lot of risk in these policies for a small amount of premium money.  A typical collector policy might have a $500 per year premium with the potential for $50,000 in vehicle loss potential, and $200-500,000 in liability potential if there is a crash.  So their payout could be huge in relation to the premium.  With that reality you can’t blame them for using the latest data analysis tools to reduce their exposure. 

Another important consideration is that most collector policies are for what is called AGREED VALUE.  That term means just what it says.  If you wreck your car, and the agreed value is $50,000, the insurance will pay you $50,000 or the cost of repairs, whichever is less.  AGREED VALUE pays the contracted sum in the event of a total loss.

Ordinary car insurance assumes you are driving a car that declines in value every year, and they call those policies ACTUAL CASH VALUE.  You may have paid $60,000 for your new Cadillac, and if you wreck it the day you buy it, that's what you'll receive.  But total it when it’s six years old and the ACV may be $11,000. That’s all you will get for it. 

Collector cars do not tend to lose value like that; hence the different type of policy.  Some collector companies offer variations of agreed value; they may increase the coverage 5% per year, or offer other provisions to accommodate changes in markets.  They may also have provisions to exceed an agreed value payment as a result of unforeseen complications once a repair has been started.

That leads me to a final area where I often read horror stories, and it concerns repairs gone wrong.  What happens when you have an accident, the insurer pays the shop to fix the car, and the repair is not acceptable?

Many times I see the owners blame the insurers, while the insurers say its not their responsibility to “do something better” or “do something again.”  They lay the responsibility on the body shop. When repairs are not up to an owner’s expectation it’s sometimes not clear who is responsible.  Did the repair shop do substandard work?  Or did the insurance company’s representative decline to cover certain repairs, or insist on a certain process which did not work out?  There’s no one answer to situations like this; I just suggest you consider all sides of the story.  Remember, as the vehicle owner, it’s your job to choose a repair shop that’s capable of doing what you need.  It’s your insurer’s job to negotiate with them and pay for the work on your behalf, but they do not assure the quality of the finished job.  That is up to you.

I hope this essay has give you some insights into the world of collector car insurance.  I have a related story on insurance here that explains the different kinds of policies.  

One final word . . .  I don't sell insurance, but I do run a company that works on classic vehicles, and we've been paid by all the companies to do jobs over the years.  In my experience, all the specialty insurers have treated us and their insureds well, and paid what we asked in a fair and timely manner.  We've certainly had issues over the years but they all worked out in the end.  I think you can be well served by any of the big names.

John Elder Robison is the general manager of J E Robison Service Company, independent restoration and repair specialists in Springfield, Massachusetts.  John is a longtime technical consultant to the Rolls Royce Owner's Club and other car clubs, and he’s owned and restored many of these fine vehicles.  Find him online at www.robisonservice.com or in the real world at 413-785-1665

Insurance and Responsibility When Your Car is in the Shop

My car was damaged while it was at the repair shop, and they won’t take responsibility.  What do I do?

I have heard that refrain many times, and I have also acted as a consultant to attorneys and insurance companies in cases involving damage and responsibility.  The truth is, “who’s responsible” is often a gray area.  I can’t possibly cover every situation in a short blog, but I will describe some common occurrences:

The first situation is where a car is worked on and it’s damaged as a direct, obvious result. You get an oil change, and they forget to put the oil back in.  Five miles from the shop, your engine fails.  This is a fairly clear-cut situation, and even if the shop denies responsibility you can typically make a claim directly against their insurance carrier in most states.

How would you find the insurance carrier?  In states where insurance is required you’d get that information from the motor vehicle department, or whatever state agency licenses repair shops.  There are some states that don’t require insurance, and some shops that don’t carry it.  When interviewing a prospective repair facility for your car, it’s wise to ask if they have liability insurance.  Any reputable business will.

If you find the shop lacks insurance I'd think long and hard about leaving my car there for service.  You may have come to this blog wondering how to hold a shop accountable, but the shoe could be on the other foot, in a big way, if something goes bad wrong.  What if the mechanic goes on a test drive, gets going fast, and hits and kills a mom and her kid?  The shop has no insurance.  The mechanic is dead.  Who do you think the father is coming after?  You. 

If you doubt that can happen just remember the recent news story where a movie star and his mechanic died on a test ride in a high performance Porsche.  Responsibility can easily fall back on you when someone else is driving, because it's your car.

A more common - and less awful - claim is for what I call “lot damage.”  My car got dented while it was here!  When a vehicle arrives at Robison Service, we walk around the car with the owner and look for pre-existing damage.  If I see a scratch or dent I’ll ask if the owner wants it fixed.  Most times, arriving cars are photographed for “before and after” documentation of the repair process.  If a shop does that, you should not have a problem determining if a dent is new or old.  Obviously, if the car got dented at the shop, they should take care of it.  Mishaps do happen, and the biggest issue is establishing whether a dent or flaw is truly new. 

There is an important exception to this rule.  Some shops are located in places where the only parking is a shared public lot.  When you park in a public lot to have your car repaired, the shop doesn’t have any more responsibility for your vehicle than another store would if you parked to buy a pair of shoes.

What if the service manager takes your car on a test drive and hits a deer?  What if he’s at a stoplight and a texting teen rear ends the car?  What if lightning hits a tree in the parking lot, and it falls on your car? In each of those cases, the damage may not be the shop’s responsibility because it occurred through causes outside their control.  In that event your comprehensive insurance would typically pay for the loss.  

In general, when you leave a car for repair, you create what lawyers call a bailment, where the car is the bailed property and the shop is the bailee. Bailees have a duty to protect property in their care, but it's not absolute.  Shops are held to what’s called a “reasonable standard of care." These real-life examples are meant to show how the standard does not extend to every possible situation where damage may occur.   Some shops have what's called Direct Primary converge where the shop insurance assumes primary responsibility for customers cars no matter what. That sort of coverage is uncommon, but mandatory in a few states.  Such policies make the shop insurance pay for any of the examples I cited.

Here's a less obvious example.  Let’s say you have 120,000 miles on your vehicle. The automatic transmission fluid has never been changed, and you decide it’s finally time to do it.  A week later, the transmission blows.  You call the shop, and they say, “That’s too bad.  You waited too long to change it.”

You think they did something wrong, but what?  Assuming the job was done correctly, the shop’s failure might be in the fact that they didn’t warn you that something like this could happen, after disturbing something that had been neglected so long.  That’s why we are always careful to warn people of possible complications in a job.  When we go to put a bulb in a car, and the fixture might break, we warn the owner of the possibility beforehand, not after.

In some cases, failure to warn the owner would make the shop at least partly responsible for the failure through a legal theory known as contributory negligence.  The owner contributed to the failure by neglecting his regular service.  The shop contributed by failing to warn the owner that a service at this late date could lead to failure tomorrow.  Both have some responsibility, and it’s up to a judge and state law to decide how that’s apportioned.

What about more serious damage? Here's a real example:

A restoration shop was in an old mill with multiple tenants.  A fire started in another tenant's building, and burned the whole thing.  A dozen cars were inside.  The shop had insurance but it was limited to $200,000 and the vehicles in the fire were worth $2,000,000.  The owners who had insurance were paid by their own policies, and the owners who didn’t have insurance got 10% settlements from the shop’s insurance.

The owners of those cars could have sued the shop owner, but their claims would be weak, because the fire was not his fault, and he didn’t have anything left to give them anyway.  All of them (shop owner too) could sue the owner of the business where the fire started, but he was bankrupt too.  The moral of that story is, carry insurance on your car, so your policy pays and let them sort out the ultimate liability between companies.

Assuming someone else will be responsible is a troubling trend in America today, and frankly, it’s dangerously misguided in many situations.  A repair shop is responsible for many things that may happen to your car while they have it, but they are not responsible for every possible thing.  That’s an important distinction.

Reading the examples above you might think I am telling you why shops are not responsible for damage. That’s not my intent at all.  There are many situations where a shop is and should be responsible for damage to a car, and I’m well aware that damage happens when cars are in the shop.  But at the same time, there are many other situations where shops are not liable.  That’s why you always want to have your own coverage on a car, even if it’s in storage. 

Disclaimer:  I’m not a lawyer and I don’t play one on TV.  I’m a service manager who has worked as an expert for both cars owners and insurance companies to determine causes of damage and responsibility.

John Elder Robison is the general manager of J E Robison Service, independent restoration and service for Land Rover, Jaguar, Mercedes, BMW, Bentley, Rolls Royce, and other fine motorcars in Springfield, MA  Find him online at www.robisonservice.com or on the phone at 413-785-1665