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Auto Insurers Say Drivers Should Be Covered If Recalled Part Causes Accident

Source: Boston Globe

Posted on 22 Feb 2010

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Many drivers of recalled Toyota vehicles are calling their insurance companies. Not only are they concerned about whether their accelerator may stick or brakes may fail, but they're wondering if they'll be covered if they're in an accident. The short answer to the most asked question is “yes," you will be covered if you drive a recalled model and you're in an accident. The insurer will then likely go after Toyota to pay the damage if the wreck was caused by a recalled part.

Two major auto insurers, State Farm and Allstate Corp., report customer calls have spiked as the Toyota recalls have escalated. Following is a Q&A on this issue that you can share with your insureds:

Q. What’s the insurance industry’s current position on covering drivers of recalled Toyotas?

A. Auto insurers say if a recalled part causes an accident, your car’s liability or collision insurance will cover you.

If insurance investigators determine a faulty accelerator caused the crash, the insurer will pay the claim and turn to Toyota for reimbursement. If the insurer gets paid by Toyota, customers may get all or part of their deductible returned.

Q. Could a recall cause insurance companies to raise their rates?

A. Typically a recall will not be enough to cause insurance companies to raise their prices. Several factors determine insurance rates including how frequently a specific model is involved in accidents, the cost of repairing that model, and where the driver lives. Toyota vehicles have good safety records and that’s an advantage in holding down costs historically, said Jeffrey Brewer, a spokesman for the Property Casualty Insurers Association of America.

Q. Are accelerators and brakes included in the safety ratings that come out each year?

A. The Insurance Institute for Highway Safety performs crash tests for vehicles and releases an annual list of top safety picks. Spokesman Russ Rader said Toyota has no cars or trucks on that list this year. He noted the criteria to make the list has been significantly tightened and now includes a test of roof strength for rollover accidents.

Various Toyota models have received top marks for safety in the past. In 2009, several models including the Corolla, Prius, Highlander, Venza, RAV4, and the Tundra and Tacoma trucks were on the list, though none are currently included.

Q. Is it likely that Toyota values could drop and therefore the cost of insuring a used car could also go down?

A. Indications are that used Toyotas are worth less right now. Auto research website estimates in recent weeks that the average value of a used Toyota’s has fallen around 4 to 8 percent, depending on the model. Spokesman Chintan Talati said the resale value decline is likely temporary and should rebound once problems are fixed.