The Illusion of Disappearing Deductibles

The Illusion of Disappearing Deductibles

Ben Kinney, JD

Recently, a number of insurance providers have begun to offer drivers safe driving rewards programs designed to encourage positive driving habits. One of the most advertised is “Drivewise” by Allstate. Anyone who installs the Drivewise plug-in device or who downloads the mobile application can allow Allstate to remotely monitor their driving habits including location, speed, acceleration, deceleration, etc. Drivewise is available to all drivers, not just Allstate policyholders. The pitch is that safe drivers will earn reduced rates.

But while Drivewise records and reports a whole host of information about users’ driving, according to the terms of service there are only three numbers that Allstate uses to determine if a driver might receive a discount. The three important numbers are the number of braking events, high speed events, and miles driven in specific time ranges.[1]

The problem is that the benefit to the driver is legally illusory. Allstate has promised drivers nothing in return for providing it with driving data. Allstate might reduce a driver’s rates because of good driving, but it might not. There is no schedule that says drivers who hit fewer than three braking and high speed events in a month will get a 5% reduction in their rate. Or even for drivers who exhibit zero braking or high speed events. On the flip side, there is no prohibition in the terms of service for Allstate using the collected data to increase drivers’ rates (of course Allstate wouldn’t introduce a new program that only allows for decreased revenue).

We as attorneys see illusory terms over and over in small business contracts. Usually, one party has decided to negotiate their own contract without legal counsel and may walk away with a contract that contains terms that sound really good on their face. However, many times these attractive sounding terms have absolutely no legal effect.

We at Stilp Business Law, P.C. have years of legal experience negotiating contract terms and arguing the legal effect of those terms in court. Whether you are just beginning to negotiate a contract or have already encountered an issue with performance of a contract, we are here to advise clients on the best course of action to realize the benefit of their bargain.