Compensation for Assessed Repair Time

Adjudication by Ombudsman

Background

This Motor Third Party Property Damage claim involve the offer for loss of
use of vehicle [Compensation for Assessed Repair Time (CART)] as well
the betterment charges and documentation charges. The Claimant is not
satisfied with the amount offered by the Takaful Operator.

The Case Manager handling this dispute gave her recommendation

favouring the Insurer. The Claimant who did not accept the
recommendation has now referred the dispute to the Ombudsman for
adjudication.

Issue

The only issue to determine here is whether the amount offered by the
Takaful Operator is in accordance with the Claim Settlement Practices and
the Guidelines issued by Bank Negara Malaysia for such compensation.

Key Findings

a. Bank Negara Malaysia’s (BNM) Guideline On Claims Settlement

Practices (consolidated)

states as follows: -

“Where a claim for compensation for assessed repair time (CART) is

payable, the Insurer should adhere to the scale of CART agreed by
the industry (as per Appendix II) and explain how the amount is
derived in its offer of settlement to the claimant”.

The extract of Appendix II – Scale of Compensation for Assessed

Repair Time (CART) is as follows: -

Vehicle Type CART/Day

Private Use Vehicles

Up to 1500cc RM30

Above 1500cc up to 2000cc RM40

Above 2000cc RM50

“Terms and Conditions

1. The above scale defines the minimum amount

payable by third party insurers for CART claims where the
claimant is unable to produce satisfactory documentary
evidence, receipts, etc. to support his/her claim for CART.

2. In cases where receipts can be produced for vehicle

rentals, insurers shall pay the amount shown in the original
receipts and original car rental agreement subject to the
principle of indemnity and subject always that the claimant
shall be entitled to the rental of a vehicle of an equivalent
nature to the damaged vehicle. Such rental must be only from
a rental agency/company duly registered and licensed by the
relevant authority.

3. The number of days for computing of CART shall be

based on the independent loss adjuster’s recommendation on
the number of days for repair of the damaged vehicle subject
to the Insurer’s discretion to apply an additional seven
working days grace period for unforeseen delays.”

b. The scale of betterment is as follow:

In regard to betterment charges, the BNM Guidelines, para 8.4 provides

‘betterment’ charges are applied when new franchise parts are used for
vehicles aged 5 years and above, and the scale of betterment is as
follows :

Maximum Rate of Betterment

Age of Vehicle/Years
(%)
Less than 5 years 0
5 15
6 20
7 25
8 30
9 35
10 and above 40

c. The Claimant’s vehicle which is 1596 cc would fall under the category
of RM 40.00 per day.

d. The Independent loss adjuster had recommended 10 days for the

repairs. The Insurer at

their discretion added another 7 days based on the guidelines above.

Adjudication and reasons: -

Based on the above key findings, the Insurer had complied with the
Guidelines on Claims Settlement Practices issued by Bank Negara
Malaysia for such compensation.

It is important to note that the calculation for Compensation for Assessed

Repair Time (CART) is determined by the number of days required for the
repair of the damaged vehicle as assessed and recommended by the
adjuster and shall exclude any delays, and/or by whomsoever caused
which may occur before and/or after the assessed repair time. This would
mean in assessing the claim the delay as a result of time taken by the
Insurer to assess the claim, the time taken by the adjuster to come out with
a report and the delay taken by the workshop in conducting the repair
works will not be taken into consideration.

As to the betterment charges, since the vehicle was 6 years old at the
material time of accident, betterment charges would apply since new
franchise parts have been used on the said vehicle .In the case
of Reynolds v Pho In Reynolds v Phoenix Insurance Co., (1978) 2
Llyod’s Rep 440, it was held that the principle of betterment was too well
established in insurance law to be departed from.

Forbes J said :

“Now the principle of betterment is so well established in the law of

insurance to be departed from at this stage even though it may
sometimes work hardship on the insured. It is simply that an allowance
 must be made because the assured is getting something new for
something old.”

As for the documentation fee, the Takaful Operator was unable to pay
since it was not supported by receipts.

We take note of the Claimant’s contention that guidelines are meant to

guide and there can be exceptions. However, we are constrained to follow
the above guidelines until such time it is revised.

Accordingly, we find that the Case Manager here had made the correct
recommendation in this dispute.

This adjudication is in favour of the Takaful Operator.

Please be informed that this adjudication is final and there is no appeal.

However, the Claimant’s right to commence legal proceedings against the
Takaful Operator still remains.