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Reducing damage claims

September 12, 2011
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Customer damage claims have long been both costly and frustrating for carwash owners and operators. Frequently, when a customer would make a claim, an owner was left wondering, "Was this really caused by my equipment, or was the car previously damaged?" Even worse, a customer could return days later claiming the mysterious damage done to their car must have been caused by errant carwash equipment.

However, today, thanks to damage claim inspection systems and insurance, owners can significantly reduce the number of damage claims they pay out of pocket. In fact, a camera system can offer both prevention and protection by capturing high-definition footage of every car that enters the tunnel. It's true, Big Brother is watching, and this time the all-seeing eye in the sky can save you money.

Common claims

The most frequent insurance claim made by carwash owners and operators is damage to customer vehicles, according to Scott Brothers, president and CEO of The Insurancenter. The majority of these claims are the result of malfunctioning equipment.

One example is a conveyor stopping in a tunnel causing an incident where several vehicles are damaged. Another example is an employee operating a customer's vehicle. Here, an accident can occur before or after the vehicle has entered the wash, and there can be severe damage caused to not only the customer's vehicle but to other vehicles and property as well.

Allen Spears, chief engineer of and a carwash owner, said his touch-free carwashes would get one to two damage claims per week, depending on how many cars were washed. But, when he converted the locations to friction washing, the amount of claims doubled — sometimes tripled. And, interestingly, Spears said that, although he can't prove it, it seemed that an upscale location always had more claims, and the repair estimates were higher as well.

Inspection systems

For years, operators tried using traditional cameras to monitor the flow of cars in the tunnels. "Some of the problems we encountered were that either we didn't use enough cameras, or we didn't have enough places to hang them, or they were simply too far away to detect fine scratches and small dents," Spears said.

Today's inspection cameras typically have an "eyeball" lens that can be angled forward, backward or to any other angle needed for close-ups of different parts of the vehicle, Spears explained, allowing new systems to be much more effective. "[The cameras] also have ultra-wide angle lenses that are optimized for the close distances needed to discern smaller scratches and dents," he added.

Also, along with the inspection cameras, Spears said there are typically companion cameras tied into the same system that are placed along the conveyor line to observe things like equipment function, brake lights and roller jumps.

Complete inspection systems also include stanchions to hold the cameras at a controlled distance, regular or HD digital video recorders (DVRs), monitors and all associated wiring and camera power supply. Spears said the stanchions include an electrical connection box and concrete anchors as well.

Camera placement

Spears said cameras should go after the start of the conveyor so that the speed of the vehicle moving past the cameras is constant and controlled by the conveyor. The distance to the vehicle will also be tightly controlled by the conveyor as most stanchions are placed 2 or 3 feet away from the vehicle.

Also, in most cases, it's easier to see fine details in sunlight, Spears said. So, if the conveyor extends out the doorway, it can be best to put them just outside the entrance, unless the area is shaded or the natural light is obstructed.

Spears said he makes sure the bottom cameras can see the wheels very clearly. "A common claim is that the rails on the conveyor [have] scratched the bead areas on their expensive rims. This is a possibility, especially on low-profile tires."

Placing cameras at a tunnel exit can help stymie another common damage claim in which customers come back later on and claim that some type of damage occurred at the carwash. "When I show the customer that the damage was not evident when the vehicle left the carwash, they usually figure out rather quickly that the damage had to have happened somewhere after leaving the carwash," Spears said.

Saving the footage

Inspection system DVRs must have the ability to perform real-time recording on all the cameras simultaneously at the highest resolution settings. Not many DVRs have this ability, according to Spears. If security cameras are also recording on the inspection system DVR, it will fill up all the available archive space quickly and result in far fewer vehicle inspections being archived.

Spears said at busy locations that use suggested resolutions, frame rates and archive storage capacities, an operator can usually have two to three weeks worth of vehicles saved to a DVR. When the storage space is full, the system records over the oldest footage, so an owner will always have the latest two to three weeks of vehicles in the system.

Curtailing claims

According to Spears, many customers have pre-existing damage, but they simply did not notice it before. Even deep scratches that have rust forming can look fresh and new after a vehicle has been washed. Without a damage claim inspection system, there's usually no way that an owner can prove that the equipment did not do the damage.

In the past, Spears said he's had to pay a damage claim that he felt was not his fault. "Especially on vertical scratches when all of my equipment moves and rotates horizontally. I found that a denied claim, without video to convince the customer, resulted in bad ‘word of mouth' publicity and a damaged reputation." Spears paid quite a few claims simply because he could not sway the customers' opinions, and he wanted to avoid negative gossip and postings on the Internet.


Insurance, in some form, has been available to the carwash market since the inception of the industry, according to Brothers. However, early coverage was considered too hazardous for most insurance companies. The primary provider of coverage was the non-standard insurance market, and this resulted in extremely high premiums and limited coverage for carwash owners. Today, insurance liability claims are generally payable on the basis that the insured is legally liable for the damages. This means that if the case were taken to court, the law would require the payment of damages to the plaintiff, Brothers said.

Still, insurance helps prepare an owner for damage claims by being pro-active instead of reactive. Brothers said that once a risk is identified, the insured owner can choose to avoid the risk by discarding the cause, reduce the risk by changing procedures, determine (before a loss) an amount that is economically feasible to retain as an operating expense, or transfer the risk to others by contract.

Brothers said that even after an owner applies risk management, Murphy's Law still can apply. Therefore, it is important to not only recognize the areas where an accident is most likely to occur, but to be keenly aware that an accident can happen anytime and anywhere.

Combined with cameras

With damage inspection systems, Brothers said few insurance companies, if any, have a credit factor that will reduce premiums because a camera system has been installed. However, the installation of a monitoring system does have a positive effect on the premiums paid. The intent is to provide a deterrent, and when losses are reduced, the premiums paid are also reduced. Also, when a request is presented to an insurance company underwriter, the presence of a monitoring system creates a more favorable climate in that it shows the insured is anxious to do what they can to reduce losses, according to Brothers.

With Spears's carwashes, he has educated his insurance company on the systems and has explained what they have done to reduce his claims. "The insurance provider had noticed a decline in claims paid out, but they had no way of knowing how much the system has reduced my claims overall until I told them," he said.

Spears said his insurance deductibles have gotten consistently higher over the years, so he's tried to keep the premium increases from being so expensive. "Therefore, I have to pay most claims, as the damage does not usually rise to the level of my deductible."

Before installing the inspection system, Spears was turning in two or three claims a year. Since the installation, he has not turned in any damage claims for the last four years. "The system has saved me thousands of dollars a year and paid for itself many times over," he said.

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