In March 2014, we issued a Determination regarding a motor vehicle insurance dispute. The applicant had lodged a claim which was denied due to non-disclosure.
The applicant held a policy branded ‘N Insurance’. ‘N’ was her leasing company. The policy was originally underwritten by Insurer C from 25 June 2012 to 1 January 2013. It was then underwritten by the current financial services provider (FSP) from 1 January 2013 to 31 December 2013.
The applicant lodged a claim with the FSP for damage sustained to her vehicle after it collided with a fence on 26 August 2013. The FSP declined the claim on the basis that she had failed to accurately disclose her insurance claims history.
One of the principal issues for the Ombudsman to consider was the fact the FSP considered the policy it issued from 1 January 2013 to 31 December was a renewal of the previous policy (which was underwritten by a different insurer). The FSP held this view because both policies were branded ‘N Insurance’. If the Ombudsman accepted this position then the FSP would not have been required to satisfy section 21A of the Insurance Contracts Act 1984, which deals with duty of disclosure.
Section 21A modifies the applicant’s duty of disclosure to only answer specific questions put to her (subject to the exception contained in section 21A(4)(b) which was not applicable here) when first entering into a contract of insurance that falls within six classes of insurance, one of which is motor vehicle. The FSP had not asked the applicant any specific questions regarding her claims history when entering into the contract of insurance with her. Instead, it had relied on the specific information asked by the leasing company when the applicant arranged the policy with the previous insurer. The FSP then used the applicant’s failure to update this information when it subsequently underwrote the policy (from 1 January 2013 onwards) to deny the claim.
The Ombudsman accepted section 21A applied for the following reasons:
- Although the policy was branded ‘N Insurance’, N was only an intermediary.
- The parties to the contract of insurance during the two periods were the previous insurer, the FSP and the applicant.
- On 1 January 2013, the parties to the contract of insurance changed from the previous insurer to the current FSP. This resulted in that contract being a new contract for the purposes of section 21A.
As section 21A applied in this case, and given the fact the FSP did not specifically ask the applicant to disclose her claims history prior to entering into a contract of insurance with her, we determined the FSP could not rely on her failure to disclose her claims history to deny the claim.
You can read the whole Determination here.