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Determination
Case number | 12-00-991025 |
Financial firm | QBE Insurance (Australia) Limited |
Case number: 12-00-991025 25 June 2024
The complainant held a comprehensive motor insurance policy with the financial firm (insurer) for a 2014 Maserati Granturismo MY14 Sport Coupe (vehicle).
On 16 December 2022, the complainant lodged a claim on the policy following a single vehicle accident. The insurer declined the claim on the basis that the complainant failed to take reasonable care not to make a misrepresentation. It says the complainant failed to disclose his traffic offences. Further, if the traffic offences had been disclosed, the insurer says it would not have renewed the policy. It has therefore cancelled the policy and refunded the premium paid for the policy period of 7 August 2022 to 7 August 2023.
The complainant disputes the insurer’s decision. It seeks that the claim is covered, and the policy reinstated. TL is a director of the complainant and the sole user of the vehicle. Any reference to the complainant is a reference to the complainant and/or TL.
Yes. On balance, the complainant has failed to take reasonable care not to make a misrepresentation. The insurer has also established that it has been prejudiced to the extent that it would not have renewed the policy but for the misrepresentation. Therefore, the insurer is entitled to decline the claim.
The insurer has shown that it would not have renewed the policy if all the offences had been disclosed. Therefore, it is fair that the insurer can decline the claim and cancel the policy.
This determination is in favour of the insurer.
The insurer is entitled to cancel the policy and refund the premium paid. The insurer is not required to take any further action in relation to the claim or this complaint.
Yes. On balance, the complainant has failed to take reasonable care not to make a misrepresentation. The insurer has also established that it has been prejudiced to the extent that it would not have renewed the policy but for the misrepresentation. Therefore, the insurer is entitled to decline the claim.
The complainant’s policy was renewed on 7 August 2022. There is no dispute this policy was obtained wholly, or predominantly, for the TL’s personal purposes. Therefore, it is a ‘consumer insurance contract’ as defined by the Insurance Contracts Act 1984 (the Act).
As a result, the complainant had a duty to take reasonable care not to make a misrepresentation (duty) when renewing this policy. This is set out in section 20B of the Act.
To refuse to pay a claim on this basis, the insurer must be able to at least show:
On 7 July 2022, an invitation to renew the policy was sent to the complainant’s broker. The invitation asks the complainant to:
The Policy Details set out the questions asked of the complainant and his previous answers. It says (offences question):
The renewal includes a section entitled Your Duty When You Renew This Policy. It says:
By law, you must take reasonable care not to make a misrepresentation. This means before renewal, you must review this information and tell us if anything is wrong or if there have been any changes. Some types of changes may impact our offer of renewal terms.
If we do not hear from you and you renew your policy, this means you agree that the information you have previously provided to us is correct and that nothing has changed.
If you do not tell us about anything that has changed, or if any of the information is misleading, incomplete, inaccurate or fraudulent we may reduce or not pay a claim, cancel your policy or treat it as if it never existed.
If anything is unclear, please call us.
(changes requirement)
On 8 July 2022, the complainant’s broker provided a closing to the insurer seeking that it renew the policy based on the ‘below and attached schedule for a description of risk(s) insured’. This included the offences question and the complainant’s response of ‘None Disclosed’.
The broker says it emailed the invitation to renewal and closing to the complainant and asked it to confirm the accuracy of the information recorded. Further, based on the transcript of the interview with the complainant, the complainant appears to accept that the document was provided to it by the broker. However, TL was in the middle of a messy divorce and says he would have forwarded them to his accounts payable team to arrange payment without carefully reviewing the documents.
On 28 November 2022, the complainant sought to add a Mercedes Benz (second vehicle) to the policy. It completed and signed an additional vehicle declaration (declaration) in relation to the second vehicle. The declaration also included the offences question. On this occasion, the complainant listed two offences. One is said to have occurred in February 2022 and the other occurred on 28 August 2022 (exceeding the speed limit by more than 10 but not more than 20 km/h), after the policy had been renewed. In relation to the February 2022 offence, I consider, on balance, that this was an error and the complainant intended to refer to the April 2022 offence (exceeding the speed limit by not more than 10 km/h). There was no offence in February 2022. Once disclosed, this was added to the Maserati policy information as well.
Given the above, I am satisfied that the complainant received the policy documents, including the renewal invitation, the closing and the declaration.
The ‘Important Notices’ on the first page of the invitation to renew asks the complaint to check if the policy information is correct and to notify the insurer of any change or anything that is not clear or that the complainant does not understand. This is repeated in the declaration.
The invitation to renew, closing and declaration all inform the complainant of its duty not to make a misrepresentation. If this duty is breached, the insurer says it may be entitled to refuse to pay a claim, reduce the amount payable for a claim or cancel the policy.
Both the invitation to renew and the closing include the previous answers to questions asked of the complainant, including the offences question. It lists the complainant’s response as ‘None Disclosed’. They also refer to the changes requirement.
The insurer obtained a copy of the complainant’s driving history following lodgement of the claim. This shows that in the three years prior to the policy incepting, the complainant had committed the following additional offences:
(additional offences).
There is no dispute the complainant failed to inform the insurer about any of the offences at each of the renewals in 2020, 2021 and 2022. There is also no doubt the offences were relevant and captured by the offences question at renewal. Further, as the complainant failed to update the insurer, I accept the insurer would have expected the complainant had no offences when the policy was renewed in August 2022. Therefore, I am satisfied the complainant’s information was incorrect and that a misrepresentation was made.
It is not enough that the complainant made a misrepresentation. It is necessary to also consider whether the complainant failed to take reasonable care not to make the misrepresentation.
As set out in Section 20B(2) of the Act, whether the complainant has taken reasonable care not to make a misrepresentation is to be determined with regard to all the relevant circumstances.
Section 20B(3) sets out some factors to take into account. These are:
I am satisfied the insurer’s renewal process adequately explained the nature and effect of the complainant’s obligations to answer the questions asked honestly and correctly and to ensure the information provided at renewal was correct. It is clear the complainant was required to inform the insurer of any changes to the information contained in the policy documents.
Further, the offences question and changes requirement in the invitation to renew and closing was clear. Therefore, I am satisfied the policy documents set out the complainant’s duty and the consequences of not complying with its obligations. The insurer also states repeatedly if the complainant does not understand anything or has any questions that it should contact the insurer. Moreover, I accept this information was relevant to the insurer’s decision to renew the policy.
The complainant says:
There have been several infringements, restrictions and suspensions across the complainant’s driving history.
At the time the second vehicle was added to the policy, the complainant turned its mind to notifying the insurer of offences committed. However it seems it only disclosed two offences and failed to disclose the additional offences. Further, the complainant had an opportunity to disclose the prior offences both on the 2020 and 2021 renewals and also failed to do so.
Therefore, having regard to all the circumstances, I consider the complainant has failed to take reasonable care not to make a misrepresentation.
Section 28 of the Act describes the rights of the insurer where there has been a breach of the duty to take reasonable care not to make a misrepresentation. Section 28(3) says where a breach has been made, the insurer’s liability for a claim may be reduced to the extent the insurer was prejudiced. This returns the insurer to a position in which it would have been but for the breach.
When considering if an insurer is entitled to reduce its liability under section 28 of the Act it is necessary to consider what the insurer would have done if the relevant duty had been complied with. The insurer has the onus to show what it would have done and the extent of any prejudice it has suffered as a result. The standard the insurer must meet is the balance of probabilities.
The complainant says the insurer has acknowledged the fact the driving history was reviewed. Further, the underwriting guidelines say that no one is allowed to override the rules and to do so is outside the underwriting authority. However, the insurer has moved the goal posts and sought to rely on different underwriting guidelines. That is, it is not clear if 2 or 3 offences constitute a strict decline under the insurer’s guidelines. It also challenges the statement that no discretion can be applied to the underwriting guidelines.
The insurer says that had it been informed of the offences, it would not have renewed the policy. The insurer has provided a statutory declaration from its Underwriting Manager which states:
On balance, I am satisfied the insurer would have applied the underwriting rules, which are clear and provide no discretion in terms of how they apply in practice. I also consider the requirements for certain types of vehicles, including Maseratis are express and clear.
I am not persuaded by the complainant's argument that the insurer should apply a discretion. I consider the guidelines are prescriptive and do not allow for any discretion to be applied. The policy documents are also clear. Therefore, I am satisfied that the insurer would not have renewed the policy if all the offences in the three years prior to the 2022 renewal had been disclosed. Further, I am satisfied the insurer has established that it was prejudiced to the extent that it would not have insured the vehicle if the complainant had disclosed all the offences. On balance, I consider that based on the underwriting rules, the whole risk would have been uninsurable.
As the insurer has shown that it would not have renewed the policy if all the offences had been disclosed, under section 28(3) of the Act, it follows that the insurer can reduce its liability for the claim to nil.
The exchanged material shows the insurer would not have insured the complainant had it not breached the duty to take reasonable care not to make a misrepresentation about the offences at renewal.
The insurer is entitled to cancel the policy and refund the premium paid.
The insurer has shown that it would not have renewed the policy if all the offences had been disclosed. Therefore, it is fair that the insurer can decline the claim and cancel the policy.
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.
