Last week, my car was hit by a truck owned by a landscaping company while in a parking lot.
I got their insurance information, contacted them, etc. - in the end, the company has made arrangements to pay for the repairs and my rental car while it’s in the shop directly rather than through their insurance (about $1700 total) - the people at the body shop said this is not uncommon.
My question is, why? Isn’t that what their insurance is for? Or do they carry a high deductible policy, and consider paying for these sorts of incidents part of their cost of doing business?
Possibly the cost of paying direct is less than the increase in premiums. Especially if the company is near the limit set by their insurance for accidents.
When I drove for a courier service, one accident could end the driver’s employment as the insurance would refuse to cover the driver and there was a limit for accidents per period.
FedEx ran into my car right in my driveway. They were self insured and tried to lowball me. I had already gotten a decent price at a local shop I trusted but when they hesitated I told them I was going to get the dealer estimate to return the car to it’s original condition. They suddenly liked the estimate I already had and sent a check immediately.
A rule of thumb says that for every dollar you pay in insurance premiums, you get $.50 back in settlements. It follows that you’ll come out ahead by self insuring for losses you can afford.
Obviously, YMMV. For example, if you are at substantially higher than average risk for losses, you may do well to self insure for smaller amounts.
Even small businesses like landscapers tend to have working capital. Depending on the damage level, if you have the cash, it’s often cheaper in the long run to pay it out of pocket than to pay the increase in premiums. If they can settle it quickly without involving insurance they are better off.
The person who suffered the damage may be better off too as insurance companies are experts in paying as little as possible. The landscaper probably isn’t, they’ll just pay the bills, as they don’t have the same leverage an insurance company has to drag it out or shrink the payment.
I agree, they’re just trying to keep their insurance company from finding out. Now, generally I think that’s fine, at least from the victims POV. You got your money and it probably shouldn’t make any difference who’s pocket it came from.
However I had an odd and similar situation. Someone was at my business and damaged one of our vehicles. While he was on the phone with his boss, I had a body shop guy run over and write an estimate. It was 800ish dollars. A few weeks later we got a check for that amount, issued directly from the company. As I stated earlier, I was fine with that. My problem was that the follow February we got a 1099 from them for that amount. They must have paid as if we were a vendor/1099 worker.
That means we now have to pay income tax on that money so we end up a few hundred short of the repair bill. Now, since we didn’t actually repair the vehicle, it was essentially free money, so it wasn’t that big of a deal. But I suggest that we call them and tell them they need to take care of this. Either do whatever they need to do on their end so the money isn’t taxable or cough up a few more bucks to cover this.
Going forward, it would probably make sense to (if we had planned to fix it) have them pay the body shop directly.
It’s the same over here. Imagine you have a fleet the size of FedEx; to fully insure it would mean a large premium straight off the bottom line. With self-insurance, they can set aside a sum substantial enough to cover all the normal hazards of driving and take insurance to cover the possibility of a huge injury claim or the like. The sum set aside would still be earning interest so it is not ‘lost’ money.
Many government organisations take it a step further - vehicles owned and operated by the NHS are not insured at all - the government (the taxpayer) will ultimately pick up any costs that can’t be met from the budget.
If you watched the recent wedding in Windsor castle you might have heard that in 1992 a fire destroyed 115 rooms, including nine State Rooms, including St George’s Hall where the reception was held. It was fully repaired within five years at a cost of £36.5 million; the money coming partly from income generated by tourists. Buildings like this are never insured; a similar incident nearly destroyed Hampton Court Palace in 1986.
Yeah, you should follow up. They paid you in a way that’s completely wrong. I imagine it’s easier to reimburse you for the tax due than it is to reclassify the payment. But that’s a nontrivial error on the part of the other business’ accounts payable person.
Nitpick: FedEx drivers (at least those in the US) are independent contractors who own their own trucks. AFAIK, FedEx doesn’t insure those trucks because FedEx doesn’t own those trucks.
Your point stands, of course, for companies that own large fleets of vehicles. It’s just that FedEx doesn’t happen to be one of those companies (or maybe not to the degree one might think at first blush).
[Emphasis added]
I’m not sure what distinction you’re making between self-insurance and what the NHS does.
It sounds like you’re defining self-insurance as “paying directly but carrying a supplemental major-loss policy.” But you could describe any insurance policy with a deductible this way: the insured covers “small” losses and saves the policy for big ones. The only difference is where one sets the threshold between “small” and “big” losses.
I follow that the NHS doesn’t carry a supplemental major-loss policy on their vehicles, but why do you say their vehicles “are not insured at all?” The British government surely pays valid claims when one of their vehicles is involved in a collision. This seems like the very definition of self-insurance, at least to me.
You are incorrect. And additionally, FedEx lost a huge IRS suit because they attempted to categorize employees as independent contractors. As I related above, a FedEx truck hit my car and FedEx covered the costs.
FedEx Express and FedEx Ground are two separate corporations with a common ownership. Unlike UPS, they maintain completely separate package handling, sorting, and distribution facilities. FedEx Ground is the old RPS.
FedEx Express drivers are NOT independent contractors. FedEx Express owns their own trucks.
FedEx Ground pickup and final delivery drivers (at least until recently) are independent contractors that own their own trucks. Technically many of the drivers work for independent delivery companies that own a fleet of trucks painted in the FedEx Ground livery. Although individual drivers can bid for the right to buy a truck and service a particular route, generally most routes are owned by companies that bid on larger bundles of routes.
Also, the trucks that transport packages between FedEx Ground facilities are owned by FedEx Ground. It’s the drivers who pick up packages from shippers and make the final delivery to recipient who are (were) independent contractors.
Yes, the popular press is sloppy about making the distinction between FedEx Ground and FedEx Express and just refers to them both as “FedEx” and they are ultimately owned by the same corporation, but they are different companies with separate operations.
This reminds me of the time I got t-boned by a US mail delivery van. Apparently since the government is somehow involved in the claims process, they will not honor any supplemental claims after the original one. I have USAA insurance, so I got them involved and made sure that USAA’s adjuster was on top of things. Despite all that, there was damage to my car that was undiscovered at the time and I had no recourse to get that fixed.
You are correct really. My point is that the NHS vehicles do not have an insurance certificate like other vehicles do. An NHS driver who is stopped for a traffic offence has to explain this to a sometimes skeptical cop.I am not sure if this is the case in the USA, but in GB, a vehicle without valid insurance can be impounded and the driver left to make their own way home.
I am guessing that ‘the government’ has got wise to the fact that some people have seen them as a soft touch when it comes to claims. I would have thought that if your claim was genuine, and large enough to be worthwhile, you might well have won in court.
Nope, there is a clause in the paperwork you sign when accepting the payment that states that you are accepting said payment as full and final payment for all damages incurred in the accident.
My wife was in an accident while driving a Humvee on duty. The rental company that owned the car she hit tried to get her to submit a $2000 claim to our personal insurance after they accepted payment from Uncle Sam and threatened to sue if she didn’t pay. The Ltc. at JAG got an evil grin when we went to him for advice.
It was kinda funny in a way. He told us to wait while he called the rental company. The only polite thing he said to them was, “You have your customer’s credit card info, bill him for it.”
Sometimes it better for a large company to self-insure rather than be lumped into a risk category with other comparable companies that may have a history of large insurance claims. The insurance business is all about statistical analysis and risk management based on comparable entities. I’ve seen a company’s entire Workman’s Comp and Health Insurance costs rise at renegotiation time because of a few high cost claims.
US resident here. 10+ years ago I was pulled over one night for basically no reason (the cop said I “went through a yellow light late” but confirmed I was neither speeding, nor did I run a red light). When he asked for all my identification I found my insurance card was missing. At the time my proof of insurance was a small, thin slip of paper that could easily fall out of a standard wallet. I was given a ticket for driving without insurance and sent on my way.
I got the ticket fully dismissed in traffic court and now always have a second card in my sun visor just in case. But my point is that in the US they will ticket you (and it’s a large fee) but won’t take away your vehicle, at least not for a first offense.
Many if not most large companies self-insure for health insurance, but claims are handled by traditional insurance companies. This saves them money while not forcing them to negotiate terms with many health providers.
I wouldn’t be surprised if large companies with large truck and car fleets negotiate similar deals. That would save money with negotiated prices at a subset of body shops.
It is fine so long as the company makes good on the promise. If a company starts complaining about the cost you might have a problem since you didn’t report it to your insurance company as a backup.