QUESTION:
The insured makes a motor claim which is accepted by the insurer. Given the type of claim, the claim falls under a section 1 automatic policy benefit which is sub-limited to $5,000 in the policy wording. This again is accepted by both the insurer and insured. The insured's loss was greater than $5,000.
My question is whether the policy excess of $500 should be deducted from the insured's loss or from the sub-limit benefit amount. This would determine whether the payout would be $5,000 (as the insured's loss less their policy excess was greater than $5,000) or $4,500 (being the most the insurer will be pay less the insured's excess).
The wording of the benefit under which the claim is due to be paid reads as follows:
"The most we will pay under this policy extension is $5,000 per event unless a different amount is payable in accordance with the type of cover selected or as otherwise shown in the schedule, and after applying the standard policy excess."
The definition provided for an excess is:
"The amount that you must contribute as the initial payment towards the cost of any claim under this policy. The amount of the excess is shown in either the schedule or in this policy wording."
EXPERT ANSWER: Crossley Gates - Glaister Keegan
This issue is primarily determined by the definition of 'excess': Is it deducted from the loss or from the claim?
Here the definition says it is deducted from 'the cost of any claim'. As a claim under the policy cannot exceed $5,000, and the loss exceeds that figure, the excess is deducted from the $5,000 maximum payable.
