Matthew's Foray into Blogging

Sunday, February 19, 2006

Expensive Tire Insurance

I recently replaced the tires on the Si with a set of Yokohama YK420’s. They are H-speed rated, and not V-speed rated, but I generally don’t hit speeds of 149 mph. Discount Tire gave me the option of purchasing “certificates.” For $15.50 per tire – $62 total – they would replace, for “free,” any tire that was irreparably damaged.

In Insurance Law, which I took in spring of 2003, we covered a case, Steven v. Fidelity and Casualty Company of New York, 58 Cal.2d 862, Cal.Rptr. 172 377 P.2d 284 (Cal. 1962), in which a Mr. George Steven purchased a round-trip airline ticket from Los Angeles California to Dayton, Ohio on March 3, 1957. After purchasing his ticket and prior to departing, Mr. Steven purchased from a vending machine, for a $2.50 premium, a $62,500 life insurance policy. Mr. Steven named his wife, Mrs. Steven, as the beneficiary. This policy provided coverage for travel on “scheduled air carriers.” Additionally, coverage of substitute transportation was limited to “land conveyances.” The Lake Central Airlines flight aboard which Mr. Steven was to travel on his return trip from Dayton was canceled. After unsuccessfully attempting to arrange for train, bus, or automobile transportation for Mr. Steven, the agent of Lake Central Airlines secured a flight aboard a Turner Aviation Corporation plane. Mr. Steven perished when the Turner aircraft crashed. The plane trip on which the accident occurred was not a regular and scheduled flight of Turner. Of course, the insurer did everything it can to avoid paying the claim, and argued that Mr. Steven was not riding as a passenger on an aircraft operated by a scheduled air carrier, as defined in policy. The insurer prevailed at trial on this theory. However, the Supreme Court of California reversed the judgment of the trial court, finding that the limitation of coverage of substitute transportation to “land conveyances” did not overcome the normal expectation that coverage would extend to any reasonable form of substitute conveyance, and that the provision limiting coverage to “scheduled carriers” created ambiguity and failed to apprise the insured of noncoverage.

How does this story relate to “certificates” on tires? In discussing this case in class, the professor noted that a $2.50 premium for a $62,500 policy was actually a high premium, as the chance of calamity was incredibly remote. I hope I do not speak too soon, but have never needed to replace an irreparably damaged tire on a vehicle. Sixty-two dollars seemed like a high premium on what was essentially tire insurance for $84 tires. I opted against purchasing the “certificates.” I am saving $62, but taking the risk that I could lose a tire, in which event I will only be out an additional $22 than I would be had I paid for the insurance.


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