Motor insurance gap irks YUDP

The Young United Democratic Party
wants the government to consider amending the Motor Vehicle Insurance (Third
Party Risks) Law to ensure that innocent third parties can be covered even if
the insured person who was at fault was legally drunk.

Chanda Glidden, legal council for
the YUDP, raised the issue in an article circulated last month. She brought up
a recent case where a young woman – who was not named – was hit by a young man
who was allegedly driving under the influence. 
Because the woman only had third party insurance, her cover could not
help her with the repairs to her car.

“The young man was clearly at
fault…” Ms Glidden wrote. “However his provider refused to pay because he was
allegedly driving under the influence…. Therefore, she was out of a car with
her only remedy being to spend more time and money bringing a legal action
against him through the court.”

Ms Glidden said this was an unfair
result for the accident victim.

Derry Graham, general manager of
British Caymanian Insurance Co. Ltd, says the Motor Vehicle Insurance (Third
Party Risks) Law sets out what a policy must do.

“Without reciting the entire Act…
a policy of motor insurance must insure persons for liability to others where
death or personal injuries occur [and] it must provide cover of not less than
CI$1 million for each person injured and CI$5 million for any event.”

Mr. Graham points out, however,
that there are “numerous other permitted exclusions”.

“Even when a policy of insurance
has been issued to a policyholder, certain laws dictate what insurers must
provide cover for and what they are not permitted to exclude from cover,” he
said. “This limits what an insurance policy may lawfully cover and what it
cannot exclude from coverage.”

In most insurance policies issued
in the Cayman Islands, there is a general exclusion provision which states that
if the insured driver was in breach of the road traffic legislation at the time
the accident or damage occurred, that would be treated as a breach of policy
conditions, Mr. Graham said.

“In such circumstances the accident
would be excluded from cover.”

Although property damages might not
be covered, Mr. Graham said insurers would still have to pay for injury damages
to the innocent third-party victims.

“What would happen is that the
wrongdoer’s insurers would be compelled to pay any claim once liability was
established,” he said.

“We have a great deal of sympathy
for potential victims such as described in [Ms. Glidden’s article], however the
policy of Cayman was to ensure that innocent victims who suffered personal
injuries should be the only group to benefit from this exclusion or restriction
on policy exclusion.”

Cayman First Senior Vice President
Michael Gayle said people affect a policy of insurance to provide protection
against a given set of circumstances.

“In exchange for this cover, the
insured person has certain obligations, which include paying the agreed premium
and also an undertaking to do or not do certain things, and certainly to obey
the laws of the land,” he said.

“One of the basic underlying
principles of insurance is that the insured person has a duty to conduct
himself in a manner which is not likely to lead to a loss,” he added. “As an
example, it is unreasonable to expect an insurance company to pay for storm
damage to contents of a house when the windows have been left open, thereby
allowing the ingress of water.”

Mr. Gayle agrees that although the
Motor Vehicle Insurance (Third Party Risks) Law provides for coverage of
innocent third parties with respect to bodily injury, the law does not address
property damage. As a result, the decision of whether to indemnify the property
damage of innocent third parties fall to individual insurers.

“We have agonized over this and
have taken the decision not to include such a restriction in our policy as it
causes undue hardship to the innocent third party,” he said. “Accordingly, our
policy covers all third party damage caused by someone [driving under the influence].”

Mr. Graham said BritCay does the
same thing.

“British Caymanian Insurance Ltd
had determined a some time ago that even in situations where DUI or other
breaches of the road traffic legislation might have occurred, they would not
seek to avoid indemnity to an innocent victim as a result of an insured’s

Island Heritage insurance also pays
for damage caused by their insured motorists who are convicted of driving under
the influence of alcohol, even if doing so is unfair to their other
policyholders, said its CEO, Garth Macdonald.

“[W]hen the insured also hits
another person and injures them or does damage to their property, we pay the
costs that have been incurred by the third party whether they be personal
injury or property damage,” he said. “We may then seek reimbursement of these
costs from the insured whose policy is in breach.  Again, this latter is in fairness to all
other policyholders who pay premiums in good faith.”

Ms Glidden also pointed out in her article
that accidents in the Cayman Islands involving uninsured drivers who are at
fault “are far more common than one would like to believe”.

“Where an uninsured driver is at
fault in an accident, the only recourse for the claiming party is to bring an action
against them through the court,” she wrote in her article. “In order to
counteract the third party claimant being left at such a severe disadvantage,
some jurisdictions offer uninsured motorists policies or have implemented an
uninsured motorists fund regulated by a government authority.”  

Mr. Graham said Cayman insurers
would be happy to see such a development here, but added that there would be a
cost to consumers.

“What is regrettable, is the
situation where persons are driving whilst uninsured,” he said. “They pose a
threat to the whole community by the havoc and disruption they might cause.
Having a Motor Insurers Fund – as happens in Bermuda and in the UK – is not a
free service. Motor policyholders pay a premium for this. That means premiums rise
across the board.”

Ms Glidden said she had sent her
article to the United Democratic Party and all the cabinet ministers, including
Premier McKeeva Bush.

“They said they’re taking it into
consideration,” she said. “They said they found it interesting and that it
needed to be looked into.”


  1. Mr. Graham points out:
    In most insurance policies issued in the Cayman Islands, there is a general exclusion provision which states that if the insured driver was in breach of the road traffic legislation at the time the accident or damage occurred, that would be treated as a breach of policy: WOW!!!

    YUDP. Thanks

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