Is Your Car Really Insured? a review of classic-car insurance
by Neil Maken — used with permission
Bob W., a reader in Woodland Hills, California, wrote that he had called his classic car insurance company and asked if he would be covered if:
(1) He took an antique vehicle to a local restaurant for dinner.
(2) He drove to a local grocery store for a loaf of bread.
(3) Living in Los Angeles, he took a trip up the coast to San Francisco, staying in motels/hotels along the way.
He was told that he would not be covered in any of the above cases; which made me realize that I, too, use my antique cars for considerably more than just car shows and parades, and I wondered, “Am I covered?”
I mailed a letter outlining the scenarios presented by Bob W., to twelve insurance companies, including the “big company” names so well known to us, as well as a smaller insurance companies I found during an internet and collector-car periodical search.
The first thing that I found out was that if an inquiry doesn’t fit into a predetermined category which can be readily answered by a clerk, it is conveniently “lost” by the company. Only a handful of insurance companies responded to my first letter, which was addressed either just to the company name or to the ‘Underwriter” at the company name.
In a second batch of letters, I named the president or chief officer of the company in the address, finding their names through an internet search or by telephone calls to the company. In every case the second letter - with a brief cover note explaining our objective, pointing out that we never received an acknowledgement to our first letter, and a copy of the original letter - prompted a response from either the chief underwriter or an executive.
I also began to get a flurry of telephone calls. The initial “knee-jerk” response was often tempered by further discussion. In a couple of cases, the representative back-pedaled after being directly questioned and confronted with the information that a competitor interpreted the situation differently. I realized that we’re dealing with an intangible product, and that human judgment goes into the response. There are (virtually) no hard and fast rules, and every situation is subject to the perception of the clerk reviewing it.
This means that you are only insured if the person reviewing your claim thinks that it is beneficial to the company, or if the claim is “black or white.” Shades of gray can be twisted and ignored. Having stated that, it doesn’t mean that if denied, you have reached a dead-end. Often you can get a review of your case. Sometimes it takes a bit of telephoning to get the name of a person who will take the time to carefully review the facts, and often that person is not an employee of the company from which you bought the policy, but from the company that actually accepted the policy and is doing the insuring.
Here’s how insurance works:
- You contact a insurance company, known as the “Agent.”
- You give a brief synopsis of the car(s) that you own, their value(s), and the estimated number of miles that you will drive (think this through carefully - if you only drive to a local car show or local parade occasionally, you are not going to rack up many miles). You provide a history of your driving records.
- You may supply a credit card number and have the company provisionally approve your application.
- The application is reviewed by the agent company’s underwriters (or a clerk), approved, and, often, sent on to another company that will assume the actual risk of insuring you. This second company is known as the “Carrier.” The Agent issues a policy which bears the carrier’s name first, and the agent’s name as a secondary identification.
This is usually the last that you will hear of or from the Carrier unless there is a claim or renewal. If you file a claim, the agent is usually authorized to review your claim, and, on small claims (such as a broken windshield), approve payment on the spot; the carrier is notified to pay the claim. In cases of bodily injury, disputes over fault or payments, larger claims, questions of liability, the case is turned over to the carrier.
That brings us back to the original letter sent to us by Bob W. of Woodland Hills, CA.
Is your car really insured?
Most collector-car specialty insurance companies have similar requirements. The car may not be used as regular transportation, to run local errands, as primary transportation, for getting to work, or even replacing the primary household vehicle when that vehicle is off the road. The car may not be used for racing or as a hired livery, which includes using the car for weddings, proms, or other special events.
The limitations are in place because the premium for a collector car is far lower than for the regular family car, based on the assumption that the collector car will be used less and in situations where it has less exposure to the chance of an accident.
You may be the most careful of drivers, but when you take your well-restored and well-maintained collector car onto the freeway during rush hour, you are at the mercy of all of those drivers distracted by cell phones, shaving, doing their make-up, eating their breakfast, reading the newspaper, and such. That’s the reason for both the lower premiums and for the severe restrictions enforced by the collector-car insurer.
All of the insurance companies are pretty definite about what constitutes use as a regular vehicle, and use as a collector car.
Let’s take another look at the three scenarios presented to the insurance companies.
Robbin Terry, of Midwest Classic Insurance, put it this way: “You had three great questions and I have two great answers and one that nobody will like...”
1) I take an antique vehicle to a local restaurant for dinner.
Almost all of the insurance companies questioned responded, “Sure, you’re covered. That constitutes an occasional pleasure trip, and that is allowed under your policy.” But, it was pointed out, if you are taking your wife, and perhaps another couple out to dinner (or lunch) that’s fine, but if it is a business client then you are in violation. Taking a client out removes the trip from the pleasure category (although it may be a pleasure for you to drive your car, and show it off) and places it into the business or everyday driver category.
2) I drive to a local grocery store for a loaf of bread.
No go! Whether it’s to the local supermarket or to the hardware store or even to the auto parts store, it is considered using your collector car to run errands.
Okay, what if you are coming home from that trip to dinner and stop at the supermarket to pick up a quart of milk? It is not the supermarket that is the problem; it is the purpose of the trip. The trip is an “occasional pleasure trip” and the fact that you stopped on the way home for a quick something doesn’t change that.
Let’s reverse it then. You are going to the hardware store, and the supermarket, and have a stop to pick up dog-food at the local Petco, and maybe you have to get a haircut, too. And you stop for lunch along the way. It is still using the car in place of the family vehicle to run errands and that is in violation of your policy.
Gary Gandy, the Underwriting Manager for Heacock Classic Insurance put it this way. “You have to use the ‘Prudent Man’ rule. Is this trip what a prudent man would do? Imagine that you were driving a million-dollar Duesenberg. Would you park that in the supermarket parking lot?”
So far most of the insurance companies are in agreement. An occasional pleasure trip is okay, but running errands is not. How many trips can you make and still be within the “occasional” rule? Does that mean that you can never take the car out to run an errand?
Your insurance company is probably not going to put someone into the back of your car counting your trips. If you don’t have a problem, and don’t make a claim, then they have no way of knowing whether you took a trip or not. An insurance agreement is a contract between you, a reasonable adult, and the the insurer, a gambler that you are not going to have an accident. And virtually all of the time, the insurance company will pay when you have a claim. One representative told us right up front, “The vehicle is covered. Virtually regardless of the cause....” And it is what comes after the ellipsis that we will discuss in a moment.
3) Living in Los Angeles, I take a trip up the coast to San Francisco, staying in motels/hotels along the way.
Of the three scenarios, it was this last that provoked the most contention. The insurance companies were pretty well divided down the middle as to whether or not the car would be covered under their collector program.
The pro stand was that it is merely a pleasure trip regardless of the distance, and, as an occasional pleasure trip you were covered.
The con side stated that this was a vacation trip, and so using the collector car was in violation because the collector car was being used in place of the family car.
The question of parking out-of-doors at a motel or hotel overnight seemed not to be a problem. Despite the fact that most (collector car) insurance policies specify that the cars must be stored in a closed and locked garage or storage facility, that refers to permanent storage. The insurance companies understand the need for out-of-door parking when staying at a motel/hotel (whether it is a pleasure trip or a sanctioned car-club event). Again, the “prudent man” rule comes into play. If your collector car has beautiful brass lights, brass horns, or other thief-tempting gee-gaws, don’t park it in a dark corner of a public parking lot. Although even parking it directly outside of your room doesn’t ensure safety, a theft there is less likely than in that dark, unpatrolled corner. It has been suggested that if your car is that vulnerable to theft, or removal of components, speak to the management about parking it just outside of the office, or, in a hotel, ask the doorman or valet to park the car under the front portico.
Back to the question as to whether the trip itself renders the car insurable or not. “Okay”, I granted the insurance companies that said that the car was not insured, “but what if I was visiting auto museums along the way?”
Sorry, still no! Whether it is an auto museum or an art museum or a natural history museum, it doesn’t change the intent of the use of the car. It is still in place of the family car.
“Let’s take it a step further”, I asked the insurers. “What if my ultimate destination was a car event, but I stopped at museums and other tourist attractions along the way?”
“That’s authorized, then,” they answered. “Now it is essentially a car-event, and the detours are part of the ultimate destination.”
This scenario, more so than any of the others, is subject to personal interpretation. If you have any kind of claim, the insurance company can easily respond that you don’t belong there and so you have violated the terms of the policy. The reviewing clerk might not understand the ramifications of the trip and deny the claim on general principles. It could require a series of letters and telephone calls to get to someone in authority who will review the case and make a final determination. You may lose, but at least you’ll know that you tried.
But better than chasing around after the fact, you would be well advised to make those telephone calls first, get the name of someone in authority, and get a determination as to whether or not you are covered in case of a claim. Try to get a statement in writing or even by e-mail before leaving on the trip. If their answer is no, don’t tempt fate. Take the regular family car where your insurance is not limited. (Travel outside the country requires a special insurance policy.)
Insurance plans and exceptions
Get a reading from your insurance company in advance if you know that you are going to be using the car in a way that differs from the norm. Almost all of the insurance companies finally said, “Yes, we will pay the claim, but if, when reviewing the case, we find that you violated the terms of the policy, we may drop you as an insured or refuse to renew your policy.” If you apply for insurance, the new company may ask about your past insurance history; don’t lie. That constitutes grounds for declining a claim.
As for going outside classic car insurance, there is a minefield; virtually all insurance companies deal with claims based on book values, or on hourly repair rates at a collision shop that deal almost entirely with newer cars and may be incapable to working on classics. If the insurance company has to pay for the precise hand labor to hammer out a dent in a heavy steel fender, the insurer is liable to place an arbitrary value on the car based on marque and age, not on uniqueness or condition. Your 1956 Packard could be valued the same way that they value a 1982 Nissan, far below the actual value or replacement value of the car. You could easily find your classic totaled out by the insurance company and a check in your hand which wouldn’t buy a set of tires for that now-deceased classic.
The specialists know this unique business, often have an “agreed on value,” and provide special services. Don’t make your decisions based solely on price. Although most companies are similar, the services that they provide do vary, and one policy might fit your needs better than another.
Shop around, write letters and solicit information that will best fit your needs. What you need is out there. Policies today are often much more liberal than in years back offering unlimited mileage, special exemptions for car-club events, etc. It is no longer necessary for you to just accept what they are offering; there may be a better deal just around the corner.