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Drivers of vehicles in Mexico should update Third-Party Liability Limits

Tue, 29 Oct 2013 16:31:36 -0700

The reform which became effective on December 1, 2012 represents the first major changes to Mexican labor laws in more than 40 years. It eases legal constraints on a company's ability to hire and dismiss, lifts the ban on part-time employment, and allows probationary periods for new hires and caps the amount of money a company must pay to laid-off workers.

The most important change relating to insurance is that the Mexican Congress established an increase in the amounts of indemnities in the event than an individual causes death to a third party. This change is stated in the Federal Labor Law (article 502) in which the death benefit increases substantially. Prior to November 30, 2012, the indemnities were based on “Seven Hundred and Thirty (730})days of  The General Minimum Wage or the highest Professional Minimum Wage”, plus funeral expenses.

The new Labor Law states: “Article 502. In case of death, the compensation due to persons shall be the amount equal to the amount of “Five thousand {5000} days of  The General Minimum Wage or the highest Professional
Minimum Wage”, plus funeral expenses. As a result of this change, the liability exposure has been multiplied by two, three and up to four times, depending on the state where the accident occurs.

For example, under the old law, after an accident causing a fatality, the insurer had to pay approximately the equivalent of US$46,000 per deceased person (this amount varied depending on the State of the Mexican Republic where the fatality happened). Under the new law, the insurer must pay MX$3,779,416 (the equivalent of US$295,000) per deceased person. 

Given the significance of the Labor Reform, ABIS Group recommends that all Auto Liability Limits be increased to at least US$300,000 USD to meet the minimum required as per the law states. For further information, please contact Mario Rivera at mario.rivera@abis-group.com or (800) 554-2247.

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