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WINNIPEG, Man. -- The Manitoba Trucking Association is warning its members of a recent Supreme Court ruling against...

WINNIPEG, Man. — The Manitoba Trucking Association is warning its members of a recent Supreme Court ruling against an insurer, which could have serious ramifications on the trucking industry.

The case revolved around the issue of deductibles and salvage value, and the decision was that, in the case of a totaled vehicle, the insurance company could not take possession of the wreck and charge a deductible.

For example, a carrier has a vehicle worth $30,000, which is involved in an accident and the repair costs are higher than $30,000. The carrier has a deductible of $10,000. The insurer would regard this accident as a “total”, and would pay the carrier $20,000 (the value of the vehicle less the deductible).

The insurer would then sell the wrecked vehicle, say for the sake of this example it fetched $7,000 at auction. This value would be credited against the carrier’s record and the accident would then be shown as a claim for $13,000. The salvage value would then influence the carrier’s rating for next year.

This recent court case has the insurers somewhat confused, but it is clear that they cannot keep the salvage value and charge a deductible. They will have to decide which to apply and will do it on a case-by-case basis, reports the association.

“It is likely that carriers with low deductibles will probably see the insurer retaining the salvage and not applying the deductible,” predicts the MTA. “Those with higher deductibles will see the opposite occurring, and will be responsible for disposing of the wreck.”

On the surface this court decision appears to be a windfall for carriers, but it will have a longer-term effect on insurance costs, as insurance companies consider their rating processes and recognize that deductibles do not apply to total losses. Also there is the possibility that salvage, however valuable or valueless, will be left with the carriers.

“It is not clear how this decision will affect insurance rates,” writes the MTA. “Members are advised to be aware of yet another factor, which could influence the insurance costs.”

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