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Determination
Case number | 12-00-1030002 |
Financial firm | Allianz Australia Insurance Limited |
Case number: 12-00-1030002 30 July 2024
The complainant held a comprehensive car insurance policy with the financial firm (insurer). The policy provided insurance cover over the car for an agreed value of $105,950. On 3 June 2023 the complainant claimed on his policy following the total loss of the car by fire.
The insurer agreed to pay the claim and initially said it would cover the claim at the agreed value. However, following further investigation, the insurer says the complainant wrongly described the vehicle at policy inception. It says the complainant misrepresented the true model of the vehicle.
The insurer settled the claim for the amount it says he would have been entitled to if the misrepresentation had not been made: $66,630 (agreed value) less deductions of $2,000 (excess) and $5,650.14 (net remaining premiums) = $58,979.86. This calculation adjusted the remaining unpaid premium to reflect the correct premium deduction for the insured value.
The complainant disputes he made a misrepresentation. He says it is not clear he did wrongly describe the car when applying for the insurance. Further, he says, if he did wrongly describe the car, it was due to the insurer’s inaccurate website specifications leading him into error. He says the insurer should pay him the insured amount of $105,950 less deductions, or, at least, the lower ‘middle ground’ amount of $80,538.56.
No. The insurer has shown that, when purchasing the policy, the complainant failed to take reasonable care not to make a misrepresentation. The insurer has paid the complainant the highest agreed value it would have provided had the car been correctly described. Therefore, the insurer is not required to pay a higher settlement amount.
The outcome is fair because the insurer provided the complainant with a warning that he had a duty not to make a misrepresentation, and the possible consequences of that. As that duty was breached, it is fair that the insurer reduces its liability to the amount it would have paid had the misrepresentation not occurred.
This determination is in favour of the insurer.
The insurer is not required to take any further action in respect of this complaint.
No. The insurer has shown that, when purchasing the policy, the complainant failed to take reasonable care not to make a misrepresentation. The insurer has paid the complainant the highest agreed value it would have provided had the car been correctly described. Therefore, the insurer is not required to pay a higher settlement amount.
The complainant’s policy was issued on 3 June 2023. There is no dispute this policy was obtained wholly, or predominantly, for the complainant’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 (the duty) when taking out the 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:
The insurer has provided a screenshot of the carsales.com.au advertisement for the car the complainant purchased. It describes the car as:
2013 Land Rover Range Rover Sport V8SC HSE Dynamic Auto 4x4 MY14.5
168,000 km 8cyl 5.0 L S Petrol 8 speed Automatic
On 2 June 2023, the complainant paid the remainder of the $41,750 purchase price to the private seller. On 3 June 2023, he purchased the insurance policy online with an agreed value of $105,950. He collected the car that day. On the drive home, the car caught fire and is a total loss.
At inception of the policy, the insurer asked: ‘How would you like to find your car?’. The online policy tool gives the option of finding the car through searching the registration/plate number or giving the car details.
The complainant has provided varying accounts about whether he entered the registration number first (or at all) or selected the car by using the car details. In any event, the complainant states he ultimately used the ‘car details’ search function to select the vehicle he was seeking to insure.
By email to the insurer dated 3 October 2023 the complainant told the insurer:
My car was a 2013 MY14.5 Land Rover Range Rover Sport HSE 5.0 Supercharged. Upon closer examination my exact car doesn’t seem to be listed on the website, the MY14.5 options are offered on other 2013 Range Rovers, thus leading to the error in taking out of the policy. What I insured the car as seems like the only option with the 5.0 Supercharged engine that also has the MY 14.5 label and is not clearly a Range Rover Vogue, this is quite confusing as in 2013-14 these cars went through a significant facelift.
RANGE ROVER RANGE ROVER VOGUE SE 5.0 V8 SC
Series Fuel type Engine Type Transmission
LG MY14.5 Petrol 5.0L SCMPFI SV8 8 SP AUTOMATIC
RANGE ROVER RANGE ROVER AUTOBIOGRAPHY SE 5.0 V8 SC
Series Fuel type Engine Type Transmission
LG MY14.5 Petrol 5.0 SCMPFI SV8 8 SP AUTOMATIC
RANGE ROVER RANGE ROVER SPORT SE 5.0 V8 SC DYNAMIC
Series Fuel type Engine Type Transmission
LW Petrol 5.0L SCMPFI SV8 8 SP AUTOMATIC
Therefore, he says, he selected the following car (referred to in this determination as the ‘2013 Autobiography MY14.5’):
RANGE ROVER RANGE ROVER AUTOBIOGRAPHY SE 5.0 V8 SC
Series Fuel type Engine Type Transmission
LG MY14.5 Petrol 5.0 SCMPFI SV8 8 SP AUTOMATIC
By email to AFCA dated 22 November 2023 the complainant says:
[The insurer] claimed that I had insured the car as the wrong specification of vehicle, however my vehicle was an MY14.5 and when I entered the number plate, the option that came up was the pre-facelifted MY13.5 model. I simply selected the only option with my engine that had the MY14.5 badging, with a different specification pack on the vehicle, the website labelling was wrong and deceived me.
The insurer says that, when incepting the policy, the complainant selected the incorrect vehicle description enabling an incorrect agreed value range to be offered and selected. Had the correct details been selected, the agreed value offered would have been significantly lower than that which was offered.
The insurer says that, when the car’s registration number is entered onto its online policy system, the car details result is as follows:
RANGE ROVER RANGE ROVER SPORT 5.0 V8 HSE DYNAMIC
Year Series Fuel type Body type
2013 LW Petrol 4D wagon
Engine type Transmission
5.0L SCMPFI SV8 8 SP AUTOMATIC
Further, it says, if the car’s details are correctly entered, the correct choice was:
RANGE ROVER RANGE ROVER SPORT SE 5.0 V8 SC DYNAMIC
Series Fuel type Engine Type Transmission
LW Petrol 5.0L SCMPFI SV8 8 SP AUTOMATIC
From the information provided, I am satisfied these are the same car variant (referred to in this determination as the ‘2013 Dynamic’):
The insurer says it is unable to provide its offered agreed value range at the policy purchase date. Its underwriter says that from 19 September 2023 it offered the agreed value range of $46,990 to $66,430 for the above car.
The insurer says the complainant made an innocent misrepresentation by selecting the 2013 Autobiography MY14.5. It says this selection offered an agreed value range of $73,300 to $105,950. The complainant chose to insure it at $105,950. It says this agreed value range was not available for the 2013 Dynamic which had a lower agreed value range.
The insurer states the policy documents were provided to the complainant at inception. Those documents provide a warning that the complainant had a duty to take reasonable care not to make a misrepresentation and explains the consequences of not meeting that duty. The policy documents describe the car as:
2013 RANGE ROVER, RANGE ROVER AUTOBIOGRAPHY 5.0 V8 SC, 4D WAGON, 5 DL SCMPFI SV8, Automatic
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 accept that by choosing a selection that did not accurately describe his car, the complainant has made an innocent misrepresentation.
Whether a person has failed to take reasonable care is a subjective test to be determined with regard to all relevant circumstances including but not limited to how clear and specific the questions asked by the insurer were.
In assessing whether a person has taken reasonable care it should generally be assumed that the person is an average person with no special skills or knowledge noting the relevance of any particular factor will vary depending on the circumstances of the case.
Having regard to all the circumstances, I also accept the complainant breached the duty to take reasonable care not to make a misrepresentation.
This is based on the following:
I accept the insurer has shown the complainant failed to take reasonable care when he made the misrepresentation because he provided a description of the car that was inaccurate without taken any steps to obtain clarification (for example, by calling the insurer to clarify).
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 failure had not occurred. 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 insurer says that if the complainant had not made a misrepresentation, it would not have provided insurance on the complainant’s car at the agreed value of $105,950. It says it would have offered insurance for a 2013 Dynamic. It says this is consistent with:
The exchanged material shows the insurer would not have insured the complainant’s car for the selected agreed value had he not breached the duty to take reasonable care not to make a misrepresentation about the car’s model and specifications. Accordingly, the insurer is entitled to reduce the payout to $66,430 which is the extent to which it has been prejudiced.
I am not satisfied that the insurer engaged in misleading and deceptive conduct as suggested by the complainant. Rather, the complainant failed in his duty to take reasonable care not to make a misrepresentation when purchasing the policy. The insurer relies on the complainant’s accurate description of the car when it agrees to offer insurance. In this instance, the complainant wrongly described the car. In circumstances where he believed the insurer’s online policy site did not offer the correct variant for his car, his obligation was to make further enquiries with the insurer.
I am satisfied the car was accurately described in the purchase advertisement and other information relied on by the insurer, and was not an 2013 Autobiography 14.5. The complainant has provided Carsales.com.au advertisements for other Range Rover Sport V8SC Dynamic cars of other years that he says are similar to his. None of these are described as an Autobiography.
While the determination does not turn on this, I am also not satisfied that he has suffered a loss because the insurer’s settlement amount relates to a different MY and engine. The complainant says that the 2013 year Range Rover Sport vehicles went through a facelift and that the MY14.5 Range Rover Sports had a completely different look to the MY13.5. However, Glass’s Guide shows that 2013 Dynamic and the 2013 Range Rover Range Rover Sport 5.0 V8 SC HSE Dynamic LW MY14.5, both of which are described as 5.0 V8 SC, had a new purchase price of $161,000 and now have an above average condition sale price of $41,700.
The complainant disputes the insurer’s use of the Redbook to gauge his car’s value. However, the insurer is entitled to offer a set agreed price range for particular types of vehicles. It has agreed to pay the top of its agreed range for the insured model that most closely matches his car. That price is $66,430 and is $24,700 more than the Glass’s Guide above average price. The complainant has supplied carsales.com.au advertisements for similar cars at higher prices. However, they are all newer cars, the oldest of which is a 2014 model, MY15, with an asking price of $75,000. I am not satisfied those advertisements show his car is correctly valued at more than the insurer has paid.
The complainant says the insurer should be required to pay him the $105,950 insured amount as it told him it would pay that higher amount. He says the insurer should be bound by its promise.
In Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2022] HCA 38, the High Court of Australia said an insurer can in certain circumstances deny a claim after saying it would accept it (or partially accept it). In these circumstances, I am satisfied the insurer is entitled to reduce the agreed insured amount even where it had previously represented it would pay the higher agreed amount.
The outcome is fair because the insurer provided the complainant with a warning that he had a duty not to make a misrepresentation, and the possible consequences of that. As that duty was breached, it is fair that the insurer reduces its liability to the amount it would have paid had the misrepresentation not occurred.
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.
