What rights do I have under an insurance claim made against me?

Question Details: I have been contacted by an insurance company of a lady whose garage I damaged last year. My claim for my car, including liability insurance, was declined. It's been over a year and a half. I was never offered the chance to get my own quotes, and now the insurance company has turned a rather simple repair job into a $4,000 job. What rights do I have when the insurance company is trying to claim back all the money? Can it wait more than a year and a half to contact me about the recovery of funds for their client's claim? It can't even prove exactly what damage I myself did.

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Answers by Lawyers

Community Law Wellington & Hutt Valley

It's hard to give you specific advice without knowing more detail. However, the following information may be useful.

First of all, if you think there’s any chance that your own insurance company incorrectly declined your original claim, you might still have the protection of your insurance. If you think your claim was wrongly or unfairly declined, you can make a complaint to your insurance company. If that complaint isn’t resolved, you can then make a complaint to the Insurance and Savings Ombudsman. Click here for more information about the complaints process: iso.base2.co.nz. Or call them on 0800 888 202.

If you don’t have any success with your own insurance company, you’re back to dealing with the insurance company who insures the garage. The insurance company is probably looking to recover all their costs, not just the cost of the repair. You may find that your $4,000 bill includes administration costs, the cost of assessing the damage, and so on. Because the insurance company is asking you to pay, you are entitled to know what their process is and how they’ve decided how much your debt is.

Call the insurance company. Tell them that you’re disputing your debt to them. This lets them know that there may be some issues to sort out, and they may agree not to take debt collection action until the amount of the debt is agreed. You need to tell them why you’re disputing the debt. At this stage you might simply say that you need more information from them.

Ask them to explain why they are claiming so much, and how they've established that the damage was your fault. Ask them if they will give you a copy of any reports they have had done. The sorts of things you might ask for from their file include:
• a breakdown of all their costs;
• how they believe the damage was caused;
• any reports they have on the extent of the damage;
• what repair options were considered;
• how they decided on the repair option they chose; and
• why it's taken so long for them to contact you.

The insurance company may ask you to put your request in writing. If they do, you should do this as soon as you can.

When you get this additional information, you may want to discuss it with a lawyer, to help you decide what your best next step is. Click here to find your local Community Law Centre: www.communitylaw.org.nz

One option might be to make a settlement offer based on what you think the cost of the repairs really was. The insurance company will probably be prepared to negotiate the amount if it means they don’t have to spend any more money on this claim. This is the best option if you have already accepted that the accident and the damage was your fault.

Otherwise, to enforce the disputed debt, the insurance company will have to go to the Disputes Tribunal to recover the amount. This could be quite good for you: they will need to show how they decided that you are liable for the damage, and they’ll need to show how they reached the $4,000 amount that they’re claiming. If you think they’ve got it wrong, you can explain your side of the story.

The Disputes Tribunal is a fairly cheap and informal way to settle disputes involving amounts of less than $15,000. There are no lawyers in the Disputes Tribunal, and cases are heard by a referee, not a judge. More information about the Disputes Tribunal can be found here: www.communitylaw.org.nz

Because the insurance company is probably looking to recover all its costs, be aware that if you are unsuccessful at the Disputes Tribunal the amount you are being asked to pay to the insurance company could increase.

Answered 24 Oct 2012. The IMPORTANT NOTICE below is part of this answer.

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