High Performance Driver Education coverage insures bad things don't happen to good people (that's you) during track days

Here's a man-bites-dog twist to track day crash liability concerns, resulting from a crash at a Dodge Viper Owners Invitational track event at Las Vegas Motor Speedway. Dodge sponsors such events periodically, and invites Viper owners to participate. The sessions include classroom instruction, track time, and professional driving school instructors.

According to reports from knowledgeable sources, here is the surprising story. A novice (never before on any track) Viper owner, who just happened to be a state court judge, was paired up with an instructor from a professional racing school. Everyone involved signed a full release of liability. After the first couple of laps, the instructor insisted that the student was braking too early for the turns, and told him to stay on the throttle until the instructor told him to hit the brakes.

Whether it was a communication problem or reaction problem, the end result was that the student braked too late, sending the Viper into a spin and into the concrete wall. The student was unhurt, but the instructor's foot was tangled up in the mangled floorboard, trapping him in the car. He was cut out of the car and rushed to the hospital. In addition to less permanent physical injuries, he lost a toe that the doctors were unable to reattach.

In a twist to the usual track liability claim, the instructor sued the student, claiming he was to blame for the injuries because he didn't follow instructions. The instructor's claims include medical costs, pain and suffering, loss of the toe, lost wages, impairment of his ability to properly heel-and-toe downshift, and loss of marital relations from his resulting feelings of inadequacy without the toe. He has demanded $1.5 million in damages, and the case is presently scheduled for trial in October.

This is not the first time "Legal Files" has reported on track liability and the fact that most automobile insurance policies now specifically exclude racetrack claims from coverage, but many track day participants still don't understand or believe that.

Problems beget opportunities

Fortunately, a new industry has developed to fill the need. An Internet search under "track day insurance" will identify a number of insurance agencies that offer coverage specifically designed to protect you and your car from financial ruin. These policies typically cover damage to your vehicle only, but some offer liability protection as well. Some are single-event policies, while others are annual policies. There are too many to list and detail, so "Legal Files" reviewed three companies' offerings to give readers an overview.

Steve Katz, of Jacob J. Katz and Company (www.ontrackinsurance.com), worried about his own lack of coverage when driving his Viper ACR at track days. He searched around for an insurance company that would be interested, and eventually paired up with Great American Insurance Company to offer High Performance Driver Education (HPDE) coverage. Instant price quotes and online applications are easy to use. Maximum available coverage is $100,000, but Katz expects that to increase substantially very soon. Premiums are typically about 0.56% of the value of the car. The deductible is 5% of the value of the car, with a $1,500 minimum. Coverage is afforded for an entire event, whether it is one or two days in length, with a 50% discount for a third day of an event.

For example, say you are driving a $50,000 Porsche Boxster S. Your premium will be about $280 for the first two days, with a deductible of $2,500. $15,000 of crash damage costs you $2,500 to repair. Total the car, and you get a check for $47,500.

Your premium is refundable, except for the modest service fee, if you don't participate in the event after buying the policy. Damage caused by you, your designated co-driver, or your instructor is all covered. Applications are virtually automatically accepted if the event is listed on their calendar (most club events are). Other events are individually reviewed. Coverage is denied for race events and race cars, defined as those incapable of being registered for street use, for those who have had a previous HPDE claim (subject to review), and for those with poor driving records.

Katz explains, "We are looking to insure competent drivers who are willing to obey the rules established at well-managed track events. We don't care so much about a ticket or accident or two, but 'habitual traffic offenders' display a lack of willingness to follow the law, and are likely to not follow track rules either."

Katz assures readers that HPDE coverage is sorely needed. "The days of racing exclusions requiring 'speed contests' or 'timed events' are long gone. So are the days of insurers that will cover you once before they cancel you. Every auto policy I've seen over the last few years has contained a very broad exclusion that denies coverage for just about anything that happens on a racing surface."

Register and insure

Many track day sponsors have signed on with Motorsportreg.com to handle their event registrations. In a very logical pairing, Motorsportreg.com teamed up with Lockton Infinity Insurance Company to provide HPDE coverage that is a mouse-click away. The program is very similar to the Katz program, with instant price quotes and online applications. Maximum available coverage is $100,000, and premiums are typically about 0.6% of the value of the car.

The deductible is 5% of the value of the car, with a $1,000 minimum. Coverage is afforded for an entire event, whether it is one, two, or three days in length, and your premium is refundable, except for the modest service fee, if you don't participate. Damage caused by you, your designated co-driver, or your instructor is all covered. Applications are virtually automatically accepted if the event is listed on their calendar (most club events are). Other events are individually reviewed. Coverage is denied for anyone who has had a previous HPDE claim within three years, and for any racing or competitive event, including time trials.

The other way to go

Anthony Bevilacqua, of Anthony & Company, Inc. (www.anthonycompany.com), has taken a different course. Teaming up with Lloyd's of London, Anthony offers annual policies that will cover you for up to ten events per year. Each policy is individually underwritten, based upon numerous factors such as skill, claims, experience, etc. Bevilacqua gave an example of a recent quote for a 2000 Ferrari 360 Challenge Car valued at $100,000. The premium was $4,000, with 100% coverage after a $10,000 deductible. If you do all of the ten allowable events, that comes out to $400 per event, or a rate of only 0.04% of the value of the car.

But what really sets Anthony & Company apart is that they offer liability coverage as well as property damage coverage. Standard coverage is $1 million, with typical premiums of $1,500-$2,000 per year for up to ten events. Higher limits, up to $5 million, are available in the $5,000-$7,000 range. Coverage is quite broad, including any third party liability for anything that arises from a track incident, and can insure you, anyone driving your car, and any specifically designated others.

Bevilacqua agrees with Katz that most every auto policy now excludes anything that happens on a racetrack, and he stresses that the policies extend that exclusion to the liability coverage in your policy, not just the property damage provisions. He adds, "Most people agree that the liability waivers signed by participants are not enough to give complete peace of mind. There are many ways they might be unenforceable. They might not be properly signed, for example. Also, if a death occurs, the waiver might not restrict the legal claims of the person's survivors, depending on the law of the particular state. These policies are pretty cheap ways to sleep at night."

"Legal Files" agrees wholeheartedly. You are really very foolish if you think nothing bad will ever happen to you at a track event, or if you assume that your auto policy will protect you. These specialized policies are affordable, especially when you consider the cost of your entry fees, tires, brakes, fuel, and wear and tear on your car. If you participate in track events, check out these and other carriers to find the best policy for you.

A key warning

But there is a potentially huge downside here. Keep in mind that these are all agreed-value policies. Also, they contain the typical auto insurance policy provisions that damage in the range of 70% or so of the car's value will result in it being declared a total loss. When that happens, you get paid the amount of your agreed value, and the insurance company becomes the owner of the wrecked car.

So, say you want to insure your $450,000 Porsche Carrera GT. You make the mistake of thinking you can buy $100,000 of coverage and self-insure the rest. You have an incident that results in $80,000 of damage (not hard with this car), and the insurance company has the right to pay you $100,000, the amount of your agreed-upon coverage, and own the wrecked car. Even if you can talk them into selling the wrecked car back to you cheaply, you might still end up with a salvage title and a greatly diminished value.

Katz says they really have no interest in such a situation. They don't want to end up with hard feelings if this result arises, and they don't want to take the risk of partially insuring a $450,000 car. Consequently, they pay very close attention to the values placed on the cars, and refuse to provide coverage when this sort of situation is possible.

But readers shouldn't rely on the insurance company to protect them, because they stand to lose a lot of money if a loss situation falls through a crack in the policy. It's far better to know exactly what you are getting into.

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