Insurance cover for my broken lens 16-35mm f/2.8L II

<p>Dear all,<br>

<br />I recently traveled to New Zealand for landscape photography. I primarily used my Canon 5D Mark II with lens Canon EF 16-35mm f/2.8L II USM. However, I had an accident during the trip and my this lens was broken into two separate pieces.</p>

<p>After I came back, I made a claim for this broken lens to my Travel Insurance Company (I always buy travel insurance that includes camera related equipment cover). According to my bought insurance policy, it has up to AUD$4000 cover for my camera equipment. </p>

<p>My lens is 4 years old, I purchased at the price AUD$1645.00, and Canon Camera Service in Sydney provided a repair quote is AUD$1130.18, and currently such used lens costs between $1400-1600 in Australia.</p>

<p>I thought I should have no problem to be compensated by the insurance company with something between $1130.18 to $1645.00.</p>

<p>But surprisingly, the insurance only provided me $573.76. They said according to their "policy", they view this lens to have 20% depreciation each year! But the policy I bought from them has completely no such policy. I asked them to point out where the policy came from, why not in the policy statement. They could not answer my question, and finally, they agreed to send my case to their Internal Dispute Resolution to re-evaluate my case. I will have a chance to provide further information to support my complaint.<br /><br>

<br>

Now my question here is: Do you have any idea how I can convince the committee that 20% depreciation per year for this high end Canon lens is not right? <br /><br>

<br>

Thanks very much for your help.<br /><br>

<br>

Yan<br /></p>

<p> </p>

<p>Have you asked Canon if they can repair the lens? It sounds unlikely but surely worth a try.</p>

<p>Otherwise, used market prices ought to trump any plucked-from-the-air depreciation schedule, but then I'm not a loss adjuster.</p>

<p>He did say that the quote from Canon for repair was AUD$1130.18.</p>

<p>Good luck fighting an insurance company. They will find some loop hole that will screw you and make them money.</p>

<p>In a previous life I was a loss adjuster. A depreciation of 20% a year is based on some rule of thumb. This will probably work for the majority of (consumer) lenses but not for professional ones.<br>

Claims like this are first handled by claims handlers, when the client does not agree others (loss adjusters) will take over the handling of the claim.<br>

Prepare your case with valuations from 2nd hand equipment (KEH in the US, others in AUS) and Canon's repair estimate. Stick to your case; most Insurance companies will go for a fast settlement instead of and endless hassle.</p>

<p>As Jos points out - the 20% is based on a rule of thumb. </p>

<p>The company is counting on you to play dumb, take the settlement and go on. </p>

<p>Go out and buy a new lens, or repair this one - either way - have all documentation of costs, etc... ready and handy. Then send the insurance claims department a bill for the difference between the cost and the amount they have already paid, less deductible. </p>

<p>Dave</p>

If all else fails, you could try the Insurance Ombudsman service.

http://fos.org.au/centric/home_page.jsp

<p>In a business context, items of substantial cost ("capital items") go on the balance sheet and are depreciated over time, the depreciation being what appears each year in the I&E account. Depreciating an item of this kind by 20% of its initial value each year until it has been written down to zero sounds pretty reasonable to me if it is in intensive professional use. It would generally be appropriate for the insurer to pay the value to which it had been written down at the time of loss, or possibly the s/h value of an item of that age and condition, unless the policy specified new-for-old replacement.</p>

<p>first there are 2 kinds of insurance</p>

<ul>

<li>Actual Value</li>

<li>Replacement Value</li>

</ul>

<p>Clearly you purchased Actual Value. In order to demonstrate a higher value, you need to provide documentation - the best way I've seen to do that is via recent solds on Ebay and the prices for used lenses on Amazon.com</p>

<p>In addition - look at the used values on B&H, Adorama</p>

<p>Sounds like a really bad deal to me. How much did you pay for that insurance ?</p>

<p>I would provide them with all the quotes for used copies of this lens you can find and put the onus on them to provide a real world example to support the ridiculously low value they've put on the lens. If they can't find a 3-5 year old lens that is in comparable condition to what yours was in before it was broken, they're just pulling numbers out of their rear end to screw you. Going beyond the price for this specific lens, I'd ask them to find you any series II Canon L lens in good condition that sells for less than half of its new price. They're offering you about 1/3.</p>

<p>If they stick to this ridiculous quote, I'd tell them I will be taking the case to the appropriate consumer protection agency or insurance regulator where I would ask for not just the replacement cost of the lens but for punitive damages because they're intentionally not living up their contract. They're committing fraud; you paid for insurance coverage for up to $4000 of photo equipment and they're offering less than $600 for a lens that is worth over twice that. I'd ask for the name of the president of the company and send him or her a letter asking for a fair settlement and warning that if one is not forthcoming I would trash their company in every online travel and photography forum that I could find. Bad word of mouth will cost them more than they're trying to save by screwing you. Unless of course that's entirely their business strategy, in which case you'll probably find a deluge of stories like yours online and the company won't care about one more. If that's the case and you can't get a regulator involved you are probably out of luck. </p>

<p>This type of lowball offer is often an opening negotiating tactic by insurance companies, which live on float. Collect the insurance premiums upfront, lowball offers on claims, drag their feet and take as long as possible to pay. If you make it clear you will raise hell and it is even a semi-reputable company, I suspect they'll pay up to make you go away.</p>

<p>Most business equipment is depreciated over a 5 year period for tax purposes. That may be where they are getting the 20% per year from. If you called the lens a "professional" lens they may be assuming that you're using it in a business and taking a 20% per year tax depreciation on it. If you are, then they are perfectly right to depreciate it at the same rate, since that's the value you are placing on it.</p>

<p>Otherwise, just provide them with proof of current value via eBay sales or used lens prices. They'll probably then pay the current value (eventually). You may have to give them the broken lens.</p>

<p>The fact that a business can depreciate a piece of equipment at 20% per year for tax purposes does not mean its actual value declines by 20% a year and that insurance companies are justified to use that as the basis for paying claims. It's just something that is in the tax code, in part to encourage business investment in capital equipment. There are companies producing products with plant and equipment that has no carrying value for tax purposes; that doesn't mean they don't continue to insure them and wouldn't get an insurance settlement on a fully depreciated plant that burned down. Replacement cost or some measure of fair market used value (like Blue Book on cars) is the appropriate basis for insuring an item and for the insurance company to pay claims.</p>

<p> </p>

<p>I agree, but I assume the 20% per year comes from the tax code. I guess when I said they were perfectly right, I guess I meant that they were arithmetically correct if they were using depreciated value. I have no idea what insurance coverage applies on depreciated value goods. I guess that depends on the policy.</p>

<p>I believe that if you sell fully depreciated equipment, then what you get for it is regarded as profit (and is taxable), but I'm no tax expert and I don't know if that has any bearing in this case.</p>

<p> </p>

<p>Dear all,</p>

<p>Thanks very much for all your responses, which are very helpful. Basically, the insurance policy they quote for my case is as follows:<br>

<br />"The way we will pay the claim will depend on the type of cover you have chosen. If you do not have Specified Item Cover, we will, after allowing for wear, tear, and depreciation, choose between repairing or replacing the property, or paying you its value in cash."</p>

<p>During my discussion with them, they could not justify how they get such 20% depreciation per year. By the end, they just asked me to submit a formal request for re-evaluation.</p>

 

<p>I've been down that track.</p>

<p>A far better cover is to take out an "all risks" policy that includes cover for declared items whilst overseas. Its not called an all risks policy for nothing, and for camera gear its replacement cost cover.</p>

<p>Travel insurance is really good for medical and cancelled flights etc but not for camera gear, specially pro level stuff. They don't understand that stuff.</p>

It doesn't matter whether you call a piece of gear "pro" or something else. Lots of people who are not professional

photographers own expensive camera gear.

 

The important thing is to make sure you have replacement coverage and that you value it to replace it. As the current

version of the EF24-70mm f/2.8L is the EF 24-70mm f/2.8L II that is the value it should have been insured for, not what a used older lens might be selling for. Yes you will pay a higher premium.

<p>You will likely, very nearly surely, get nowhere with the insurance company, this depreciation is SOP: standard operating procedure.</p>

<p>They almost never offer it up when you purchase insurance, but everything is subject to depreciation unless you buy, in advance, actual replacement value insurance, which is not that much more expensive. Sometimes they still try to replace with a lesser model, but with the replacement value insurance you will likely win that battle. And forget getting cash with replacement value insurance: they will use their channels to get the lowest price on the replacement item. This is how they prevent scams with folks looking to dump equipment and getting cash. </p>

<p>You are dealing with one of the most rigid and heartless industries out there, the insurance biz, don't expect them to go an inch beyond that which they are absolutely required to. </p>

<p> </p>

<p>Bob</p>

<p>In terms of selling used equipment. What you're actually referring to is depreciation recovery. This is normally done for a business where you depreciate equipment over time. Same thing applies to a rental home.</p>

<p>Here's an example. Lets say I buy $10,000 worth of hardware in 2000. You then have to determine the life of the product. In the case of photo hardware - lets say you choose 5 years. This means each tax year you can claim $2000 in depreciation expense.</p>

<p>Now, lets say you sell the equipment after 2 years for $8500. You've claimed $4000 in depreciation, which brings the residual value to $6000. You subtract the $6000 from the $8500 and you end up with a profit of $2500 that you would have to report on the next years taxes.</p>

<p>Bottom line - If you are a pro and sell your hardware on a regular basis, my personal belief is that tracking all the information needed to do depreciation schedules, etc, is a major pain. I stopped depreciating the gear on my taxes, that way I don't have to report depreciation and recovery on my taxes.</p>