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Determination
Case number | 1013768 |
Financial firm | Auto & General Services Pty Ltd |
Case number: 1013768 16 May 2024
From 8 July 2020, the complainant held a comprehensive car insurance policy with the financial firm (insurer). The policy renewed annually. On 3 July 2023, the complainant lodged a claim for the theft of the insured vehicle.
The insurer declined the claim on the basis the complainant failed to comply with his duty of disclosure when the policy was incepted. Further, it says, the complainant failed to take reasonable care not to make a misrepresentation at the 2021 and 2022 policy renewals. The insurer says if the complainant had not breached the duty, the insurer would not have accepted or renewed the insurance contracts. It cancelled the policy and denied the claim.
The complainant has denied breaching his duty of disclosure. He wants the insurer to reinstate the policy and accept his claim. He also seeks interest on the claim amount and reimbursement of legal fees.
No. The claim was made during the 2022-2033 policy period. The insurer has not established that it is more likely than not that in renewing the policy on 8 July 2022, the complainant breached the duty to take reasonable care not to make a misrepresentation. Accordingly, it is not entitled to deny the claim.
No. The insurer is not required to pay the complainant’s professional costs. The complainant has not shown legal services assisted him understand or establish his case.
The outcome is fair because the insurer has not shown the complainant breached his duty when renewing the policy on 8 July 2022. On this basis, the insurer is not entitled to refuse the claim or cancel the policy. It is fair all premiums the insurer refunded to the complainant are deducted from the settlement amount paid by the insurer.
This determination is substantially in favour of the complainant.
If the complainant provides written notice he accepts this determination, the insurer is required to take the steps set out in section 2.4 of this determination.
No. The claim was made during the 2022-2033 policy period. The insurer has not established that it is more likely than not that in renewing the policy on 8 July 2022 the complainant breached the duty to take reasonable care not to make a misrepresentation. Accordingly, it is not entitled to deny the claim.
The insurer says the complainant breached his disclosure obligations at the time he incepted the policy on 8 July 2020.
At that time, the complainant’s policy was an ‘eligible contract of insurance’ under the Insurance Contracts Act, 1984 (Cth) (the Act) as it then applied. Under section 21A of the Act, an insured had a pre-policy duty to disclose, in answer to an insurer’s specific questions relevant to its decision whether to accept the risk, each matter known to them and that a reasonable person in the circumstances could be expected to have disclosed.
The complainant’s policy renewed on 8 July 2021 and 8 July 2022. Each renewal gave rise to a new contract of insurance. The claim event occurred on 2 July 2023, meaning that the relevant policy period was 8 July 2022 - 8 July 2023. This means the applicable disclosure obligations are those imposed by the Act as at 8 July 2022.
Pursuant to the Act as it applied on that date, the complainant’s policy is a ‘consumer insurance contract’. Section 20B of the Act imposes a duty on an insured to take reasonable care not to make a misrepresentation (the duty) to the insurer before entering a consumer insurance contract.
Whether or not the duty has been complied with is mostly a subjective test, informed by the facts of the case. Section 20B(3) sets out a non-exhaustive list of potentially relevant matters:
The insurer sent a renewal offer to the complainant on 16 June 2022. The renewal offer requested the complainant review the information provided and to contact it if he required changes to be made. The offer clearly sets out the duty to take reasonable care not to make a misrepresentation. It also warns the complainant of the possible consequences of failing that duty.
The cover letter confirmed that if no details had changed, the complainant was not required to take any action and the policy would automatically renew on the previously advised disclosures.
Included in the ‘Your declarations’ section of the insurance certificate attached to the renewal notice was the following:
However, the complainant’s criminal history shows a conviction for ‘possess commercial quantity of schedule 1 dangerous drug’ recorded on 18 June 2019.
The complainant says he did not breach the duty because:
The complainant provided the transcript of his criminal proceedings , dated 18 June 2019. The transcript includes the following:
All matters considered, he is convicted and sentenced to 16 months imprisonment. That will be suspended today. There will be an operational period of 16 months during which time he is not to commit another offence punishable by imprisonment or else he may be ordered to service the full 16 months imprisonment.
The complainant has supplied his National Police Certificate, dated 6 March 2023 showing a 2019 conviction for ‘Possess commercial quantity of schedule 1 dangerous drug’.
The complainant also provided an email from his mother, RT, to solicitors ML, dated 2 August 2023. In that email, RT says:
At the time of the hearing when we walked out of the court room [the barrister] said to my son and myself that was a good outcome as the judge gave you a good behaviour bond of 16 months and a section 10. We asked if this would go on his record and were told no as long as there were [sic] nothing else happens in the meantime.
It has only come to light when he requested a copy of his National Police Check that we realise it is now on his record as a criminal conviction and is holding him back from applying for work positions and is making his life very difficult.
Are you able to pull the file for us and see what was actually handed down in the court room for this case please?
Also can you help guide me as to whether or not this can be lifted from his record?
No response from ML has been provided.
The complainant has forwarded an email from RT to the barrister who represented the complainant in the criminal matter. That email is dated 27 September 2023 and says:
I am in need of your help please. You fought a case for [complainant] back on 18 June 2019. Regarding drug charges on a young [occupation] at the time. He has been doing very well since then with no convictions and life on track until he had his vehicle stolen and didn't realise he had a conviction on his National Police Record until a check was done for a position within the mines he applied for in April of this year.
We were positive that when we walked away from the Supreme Court it was stated that he received a 16 month good behaviour bond and a section 10. The insurance have declined his payout on his vehicle due to having something on his record not notified.
I am after a copy of the statement of agreed facts given to the judge when he pleaded guilty.
The complainant has also provided the barrister’s response to RT, dated 27 September 2023. That email attached the transcript of the complainant’s sentencing and said:
Please find the reasons for the sentence delivered by Justice [name] in the matter attached. I do remember talking to you outside the court room and possibly the wording of how I explained this was misinterpreted. I did state basically a section 10 Good Behaviour Bond for 16 months is a good outcome and result as long as he does nothing wrong in the meantime.
The insurer says the complainant breached the duty by failing to disclose his criminal conviction. It says the complainant’s breach entitles it to deny the claim and cancel the policy. This is because:
The insurer says it would not have entered the policy with the complainant if the complainant had disclosed his criminal conviction. It says, because of this, it is prejudiced to the full extent of the claim and its liability is reduced to nil.
The insurer has cancelled the policy. It says it has refunded the premiums for all policy periods since 8 July 2020.
Having carefully considered all the exchanged information, I am not satisfied the insurer has established that it is more likely than not that in renewing the policy on 8 July 2022, the complainant breached the duty. That is because:
Having considered all the exchanged information, including the arguments of the parties and the Act, I am not satisfied the complainant’s misrepresentation was caused by a failure to take reasonable care.
As the complainant did not beach his duty there has not been a relevant failure as defined in section 27AA of the Act.
The insurer is required to assess the claim under the policy.
The insurer says it has refunded the premiums for all policy periods since 8 July 2020.
No. The insurer is not required to pay the complainant’s professional costs. The complainant has not shown legal services assisted him understand or establish his case.
Under Rule D.5, AFCA may decide a financial firm should contribute to the professional costs incurred by a complainant in the course of a complaint. These costs can be awarded if the complainant needed legal representation to understand or establish their claim. These costs are normally capped at $5,000 unless exceptional circumstances apply.
The complainant has sought costs for legal fees. I am not satisfied that legal advice or representation has assisted the complainant understand or establish his case, or that it assisted in resolving the complaint. Further, no proof of payment for legal services has been provided. The insurer is not required to pay the complainant’s professional costs for legal assistance.
The outcome is fair because the insurer has not shown the complainant breached his duty when renewing the policy on 8 July 2022. On this basis, the insurer is not entitled to refuse the claim or cancel the policy. It is fair all premiums the insurer refunded to the complainant are deducted from the settlement amount paid by the insurer.
If the complainant accepts this determination, the insurer is required to do the following within 14 days of notification of the determination:
AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:
The respective parties have completed a full exchange of the relevant information, and each party has had the opportunity to address any issues raised. We have reviewed and considered all of the information the parties have provided.
While the parties have raised a number of issues in their submissions, we have restricted this determination to the issues that are relevant to the outcome.
AFCA is not a court of law. We do not have the power to take or test evidence on oath, or to require third parties to give evidence.
When we assess complaints, we consider:
We give more weight to documents created at the time the events occurred. If there are no relevant documents, we will decide what most likely occurred based on the available information.
If there are conflicting recollections and these are evenly weighted, we may find that a claim cannot be established.
