The first car was still in the shop awaiting delivery to the owner who was scheduled to pick it up the following day. That evening there was a fire in the shop, and the car was totally consumed.
The second car had been delivered to the owner less than twenty four hours prior to the loss. He was driving it when the engine, or something in the engine compartment, suddenly burst into flames. He was lucky to get out of the car, and in short order the car was totally consumed by fire.
The question arises as to who is financially responsible for the losses of each of these cars. The answer is not so simple. And the answer would not really matter much if the cars had been insured for their full value. But they were not. The insurance had not been adjusted as the value of the cars increased during the restorations. This is an oversight that I see regularly.
If the insurance had been periodically adjusted right up until the completion of the restoration, both owners would have been paid in short order, deposited their checks, and moved on. The question of who was financially responsible for these losses would have been something that the insurance company would be left to deal with.
In cases like this, after the insurance company has paid out on a claim, they will often subrogate against the shops insurance company. But it can, and often does, get much more complicated. What if the shop owners’ insurance policy had a limit that was exceeded by the loss(es)? What if the shop owner didn’t have insurance? What if the shop owner was not directly responsible? What if a defect in an electrical panel caused the fire in the shop that had burned? What if a failure of a component had caused the fire in the car that had burned? What if, after litigation, responsibility had been assigned, but the responsible party simply could not pay?
It quickly becomes clear that there is a lot of work that goes on behind the scenes after an insurance company has paid on a claim. And it is equally clear that dealing with these complications can be time consuming, expensive, and ultimately (as is often the case) fruitless. Which is why insurance companies will often decide not to pursue a case.
The entire purpose of insurance is to spread the risk of a loss over a large group, rather than have one party accept the entire risk. If you do not have insurance, or if you are under-insured, you have chosen to accept the entire risk for any loss of your collector car. And that is exactly what happened in both of these cases. Which now shifts the burden of determining who is responsible, and trying to collect, directly onto the shoulders of the vehicle owners.
This requires attorneys, investigators, fire experts, electrical experts, automotive engineering experts, valuation experts and more. These are all people that insurance companies either have on staff, or have access to. Not true for your average classic car owner.
The values of the cars in these two cases ranged from roughly $200.000 to $400,000. This puts the car owners in the unenviable position of having to decide whether it is worth investing tens of thousands of additional dollars in an attempt to pinpoint responsibility, potentially have to file a lawsuit, and finally, if successful, try to collect the money.
With cars in this value range, and given the state of the collector car market, these values are not uncommon, the answer is almost always…yes. The outcome is not so certain.
These cases illustrate the importance of due diligence when entrusting your car to a shop for anything from a simple repair to a full restoration. I often hear people say “My car was not registered, so why would I have it insured?” By now the answer should be obvious.
Collector car insurance is inexpensive to begin with, but most people are not aware that many of the specialty insurance companies that insure these cars will write a policy that eliminates the liability portion if the car is not used on the road. This saves even more money, and it’s perfect if your car is in the restoration shop. At least one insurance company that I’m aware of offers a policy designed for cars that are being restored. It automatically increases the vehicles insured value up to a limit by 10% per quarter - that’s 40% per year, without the owner having to do anything!
When your car is out of your care and control, for any reason, you had best make sure that it’s properly insured. Or be prepared for what will likely ensue.