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Determination
Case number | 12-00-1041813 |
Financial firm | SGUAS Pty Ltd |
Case number: 12-00-1041813 30 July 2024
1 Determination overview
The complaint relates to claim under the complainant’s comprehensive motor vehicle policy for the theft of her car by an unknown third party.
The insurer denied the claim relying on the policy exclusion for cars parked in the street between 10pm and 5am. It also says the complainant failed to take reasonable care not to make a misrepresentation regarding the overnight parking arrangements for the car and seeks to reduce its liability to nil on this basis.
The complainant denies making a misrepresentation and says she rarely parked on the street. She says her car would have been stolen regardless of where it was parked and says the insurer should accept the claim.
The complainant is being represented by their broker for the purpose of this complaint. For convenience, a reference to the complainant is a reference to the complainant and her broker.
Yes. While I empathise with the complainant’s situation, I am satisfied the policy exclusion regarding overnight street parking applies and the insurer is entitled to deny the claim.
I do not consider the complainant misled the insurer at the inception of the policy, however the information shows she failed to advise it about the change in parking arrangements as required by the policy. I am satisfied this has prejudiced the insurer to the extent it is entitled to deny the claim.
Where the complainant has failed to advise the insurer of the change in parking arrangements for the car, and the insurer would not have agreed to accept the risk of the new arrangement, it is not fair to require it to pay the claim.
The insurer would have been entitled to deny any claim made under the policy since the complainant began parking the car in the street. Therefore, it is fair in the circumstances for the insurer to refund any premium paid from that time.
The determination is in favour of the insurer.
If it has not already done so, the insurer must refund any premium paid for the policy from 14 December 2022.
Yes. While I empathise with the complainant’s situation, I am satisfied the policy exclusion regarding overnight street parking applies and the insurer is entitled to deny the claim.
I do not consider the complainant misled the insurer at the inception of the policy, however the information shows she failed to advise it about the change in parking arrangements as required by the policy. I am satisfied this has prejudiced the insurer to the extent it is entitled to deny the claim.
The complainant’s motor vehicle insurance policy provides cover for loss or damage to the vehicle and theft and attempted theft of the vehicle during the period of insurance.
The coverage provided by the policy is subject to conditions, limitations, and exclusions. This means that not all loss and damage is automatically covered. Rather, only loss and damage caused by an insured event, during the period of insurance and subject to the conditions, limitations and exclusions, is covered.
The full details of the policy coverage, conditions, limitations, and exclusions are contained within the Product Disclosure Statement (PDS) and Certificate of Insurance (COI).
I am satisfied that the PDS and COI have been provided to the complainant. Therefore, the insurer is entitled to rely upon the terms of the policy, including its conditions, limitations, and exclusions, to determine its obligations to the complainant.
The policy includes conditions about where the car is to be parked overnight and the insured person notifying the complainant about changes to the night time parking arrangements for the car.
The policy schedule contains the following special clause:
10.01 - Overnight Parking (applicable vehicles: 1)
If your motor vehicle is not parked in accordance with the parking arrangements stated under 'Garaging: Type', then under Section One of the Product Disclosure Statement (PDS) you will not be covered for loss or damage to your motor vehicle between the hours of 10.00pm and 5.00am. However, this applies only if your motor vehicle was parked at a location at or within a 500 metre radius of the address you have declared to us is the address where your motor vehicle is usually kept overnight.
Page 11 of the PDS says the following:
Overnight Parking
If your policy schedule states that your motor vehicle will be parked in one of the six categories of overnight off-street parking, then under Section One: Loss or Damage to Your Motor Vehicle you will not be covered for loss or damage to your motor vehicle between the hours of 10.00pm and 5.00am if your motor vehicle was not parked as it is shown in your policy schedule.
However, this applies only if it was parked at a location at or within a 500-metre radius of the usual overnight parking address, and your policy schedule is not endorsed to include overnight street parking.
Pages 23 and 24 of the PDS details the condition to notify of changes as follows:
Making Changes to Your Policy
If you wish to make changes to your policy, you must advise us and the change will be effective if:
• we agree in writing to make the change; and
...
Changes that you must advise us of include, but are not limited to:
...
• when you change the way your motor vehicle is parked overnight;
• when you change the address where your motor vehicle is parked overnight;
...
Failure to advise us of changes may result in a claim being refused or reduced to the extent we are prejudiced by that failure.
Page 42 of the PDS details the following condition of cover:
We may refuse to pay or reduce the amount we pay for a claim to the extent we are prejudiced by you not advising us as soon as reasonably possible if:
...
• your motor vehicle will no longer be parked overnight in the way that you have declared to us it would be parked overnight;
...
but we will maintain cover if:
• you have told us about the change; and
• we have agreed to cover you in writing; and
• you agree to pay any additional premium required.
Page 47 of the policy sets out conditions of cover:
You must notify us as soon as possible in writing if:
• your motor vehicle will no longer be parked overnight either permanently or temporarily, at the address you have declared to us as the address where your motor vehicle is parked overnight; or
• your motor vehicle will no longer be parked overnight in the way that you have declared to us it would be parked overnight.
It is accepted insurance law that the complainant carries the initial onus to establish, on the balance of probabilities (that is, more likely than not), a loss which is covered by the terms and conditions of the policy.
Once the complainant has established a loss which is covered under the policy, the onus transfers to the insurer to establish the application of a condition, limitation or exclusion upon which it seeks to rely, to limit its obligations regarding the claim, or to deny the claim.
At about 2am on 27 August 2023, the car was stolen while it was parked in the street directly outside the complainant‘s house. The thieves broke into the house and stole the car keys by removing a flyscreen and coming in through a window. The complainant woke to the sound of the engine starting and the car door slamming.
The police attended and have provided the following report about the incident:
There was a large 3 day crime spree over [town] and neighbouring towns during this time where a number of aggravated break and enters occurred as well as motor vehicles being stolen. Another vehicle was stolen on the same night of [the theft of the complainant’s vehicle]. This vehicle was parked in an unlocked garage. The house was broken into and the keys were obtained.
Regardless of where [the complainant‘s] vehicle was parked the offenders have broke [sic] in through a window to her house and obtained her keys. Regardless if her car was parked under the carport or 10 metres away on the street the offenders would have successfully got her vehicle as they smashed the window to get into her house.
After it received the claim, the insurer engaged investigator BS who met with the complainant on about 5 October 2023. BS noted the following about the meeting:
Based on the BS report, the insurer denied the claim. It says the policy excludes cover between 10om and 5am for cars parked on the street within 500m of the insured person’s house.
It is not in dispute that the complainant’s car was stolen, and that this is a loss of the type covered by the policy.
It is also not in dispute that the complainant's car was parked in the street outside her house, despite the policy schedule noting that the overnight parking arrangement for her car was in a carport not visible from the street.
The complainant says her car would have been stolen regardless of where it was parked. She says the insurer cannot refuse to pay the claim on the basis that it was not parked in the carport because her act of leaving the car parked in the street did not contribute to the loss. The complainant relies on section 54 of the Insurance Contracts Act 1984 (Cth) (the Act).
The insurer says its denial of the claim is consistent with section 54 because section 54 should not impose liability on an insurer to provide indemnity in respect of a risk which was never intended to be within cover, but which is somehow associated with an act or omission. It says its underwriting guidelines show it would not have accepted the risk of the car being parked on the street.
The insurer also says it can rely on section 28 of the Act because the complainant failed to take reasonable care not to make a misrepresentation regarding where the vehicle is kept overnight. It says it has been prejudiced by the misrepresentation and is entitled to reduce its liability to nil.
Insurer has the onus of proving complainant failed to take reasonable care not to make a misrepresentation
The complainant’s policy was issued on 14 December 2022. 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 Act.
As a result, the complainant had a duty to take reasonable care not to make a misrepresentation (the duty) when taking out 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:
The complainant purchased the policy via her broker. At inception of the policy, the insurer asked questions about where the car would be parked overnight
The policy was issued on the basis that the car would be parked overnight in a carport not visible from the street.
There has been some discussion between the parties whether the carport was visible from the street or not. The insurer says it would have accepted cover either way, but says the complainant made a misrepresentation because the car was being parked in the street.
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:
The information shows at the time the complainant’s broker incepted the policy on her behalf they gave clear instructions about where the car would be parked overnight. At that time, the complainant had recently moved into the property and the broker advised the insurer that the real estate photos of the carport were still available online due to the recent sale.
After the theft, the complainant told investigator BS that she was regularly parking her car on the street. The insurer says this statement shows the complainant made a misrepresentation about the overnight parking of the car.
The duty to take reasonable care not to make a representation is pre-contractual duty. In other words, it applies to the discussions in the lead up to the policy inception or renewal.
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 do not accept the complainant breached the duty to take reasonable care not to make a misrepresentation. This is because the complainant had just moved into the property, and at the time the representation made, it is unlikely the complainant’s intention was to park on the street. It appears from the information this practice was established when the complainant found the driveway was narrow and difficult to navigate.
I am not satisfied, on balance, insurer has established the complainant made a misrepresentation regarding the nighttime parking of the car.
The complainant’s duty to take reasonable care not to make a misrepresentation ended once the insurance contract was entered into, and until such time as it came up for renewal.
Despite this, the complainant had a continuing obligation under the policy to notify the insurer if the arrangements for parking the car at night changed.
By the complainant‘s own statement to investigator BS, she was regularly parking the car overnight in the street prior to the theft. This amounted to a change in the overnight parking arrangements and gave rise to an obligation on the complainant to advise the insurer of the change.
The PDS states that if the complainant failed to notify the insurer about changes to the overnight parking arrangements it can reduce or refuse the claim to the extent the failure to notify of the change has prejudiced it.
The insurer must exercise rights under this clause subject to its duty of utmost good faith in section 13 of the Act to the complainant. This means it must act consistently with commercial decency and fairness. Commercial decency and fairness require that the insurer not exercise its rights in a way which is opportunistic, such as by relying on a breach by the complainant where it has not caused it any loss, to deny the claim.
The insurer has provided its underwriting guidelines and a statutory declaration from its senior underwriter. The guidelines have not been exchanged. I am satisfied they are commercially sensitive, and the AFCA rules allow me to consider them without exchanging them with the complainant.
The guidelines show that the insurer would not have accept the risk of insuring the complainant’s car if it was aware it was parked in the street overnight.
Based on the statutory declaration and the underwriting guidelines, I am satisfied the insurer has been wholly prejudiced by the complainant's failure to notify it of the change in overnight parking arrangements. This is because had the complainant advised of the changes, as she was obliged to do under the policy, the insurer would not have agreed to continue to insure the car.
The insurer has a legitimate interest in being able to choose which risks it will insure against, and therefore being able to cancel the policy if it becomes aware that the policy is outside its willingness to accept the risk. Therefore, it would not be fair to require the insurer to accept the claim in the circumstances.
The policy contains a clearly drafted exclusion to cover for vehicles parked on the street between 10pm and 5am. It is not in dispute that the car was parked on the street overnight in breach of the special clause of the policy.
I accept the complainant was regularly parking on the street overnight, which means under the terms of the policy the insurer can deny the claim.
However, the complainant has raised section 54 of the Act which requires consideration.
Broadly speaking, section 54 says an insurer cannot refuse a claim in whole or in part by reason of some act (which includes an omission) that occurs after the contract of insurance was entered into unless it can show:
Section 54 of the Act has the same substantive effect as the condition of cover allowing the insurer to reduce its liability discussed above.
As stated, I consider the complaint's failure to advise of the parking changes has prejudiced the insurer to the extent it is entitled to deny the claim. It would not have been on risk for the car the night it was stolen had it been properly advised about the overnight parking arrangements.
I consider the relevant act is this failure of the complainant’s, not the act of parking the car outside on the night it was stolen. The insurer was prejudiced prior to the theft by continuing to insure the complainant‘s car when it was outside its acceptable risk parameters.
In any event, am not persuaded that the complainant parking the car outside the house did not contribute to the theft of her car. While I accept the actions of the thieves were brazen, the insurer‘s underwriting information and other information it provided regarding increased risk of theft for cars parked on the street shows the car was at a higher risk of being stolen while parked on the street.
Therefore, the I do not agree section 54 of the Act assists the complainant.
The insurer would have been entitled to deny any claim made under the policy. Therefore, it is fair in the circumstances for the insurer to refund any premium paid.
It is unclear when the complainant started parking her car in the street, however in the circumstances I consider it fair for the insurer to refund the premium paid for the policy from 14 December 2022 if it has not already done so.
Where the complainant has failed to advise the insurer of the change in parking arrangements for the car, and the insurer would not have agreed to accept the risk of the new arrangement, it is not fair to require it to pay the claim.
The insurer would have been entitled to deny any claim made under the policy since the complainant began parking the car in the street. Therefore, it is fair in the circumstances for the insurer to refund any premium paid from that time.
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 the information the parties have provided.
While the parties have raised several 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.
Insurance Contracts Act 1984 (Cth)
SECTION 13 The duty of the utmost good faith
INSURANCE CONTRACTS ACT 1984 - SECTION 13
The duty of the utmost good faith
(1) A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith.
(2) A failure by a party to a contract of insurance to comply with the provision implied in the contract by subsection (1) is a breach of the requirements of this Act.
(2A) An insurer under a contract of insurance contravenes this subsection if the insurer fails to comply with the provision implied in the contract by subsection (1).
Civil penalty: 5,000 penalty units.
(3) A reference in this section to a party to a contract of insurance includes a reference to a third party beneficiary under the contract.
(4) This section applies in relation to a third party beneficiary under a contract of insurance only after the contract is entered into.
Part IV—Disclosures and misrepresentations
Division 1A—Consumer insurance contracts: insured’s duty to take reasonable care not to make a misrepresentation
20A Application of this Division
This Division applies in relation to:
(a) consumer insurance contracts; and
(b) proposed contracts of insurance that, if entered into, would be consumer insurance contracts.
Part IV—Disclosures and misrepresentations
Division 1A—Consumer insurance contracts: insured’s duty to take reasonable care not to make a misrepresentation
20A Application of this Division
This Division applies in relation to:
20B The insured’s duty to take reasonable care not to make a misrepresentation
(1) Subject to this Act, an insured has a duty to take reasonable care not to make a misrepresentation to the insurer before the relevant contract of insurance is entered into.
(2) Whether or not an insured has taken reasonable care not to make a misrepresentation is to be determined with regard to all the relevant circumstances.
(3) Without limiting subsection (2), the following matters may be taken into account in determining whether an insured has taken reasonable care not to make a misrepresentation:
a) the type of consumer insurance contract in question, and its target market;
(b) explanatory material or publicity produced or authorised by the insurer;
(c) how clear, and how specific, any questions asked by the insurer of the insured were;
(d) how clearly the insurer communicated to the insured the importance of answering those questions and the possible consequences of failing to do so;
(e) whether or not an agent was acting for the insured;
(f) whether the contract was a new contract or was being renewed, extended, varied or reinstated.
(a) failed to answer a question; or
(b) gave an obviously incomplete or irrelevant answer to a question.
(4) Any particular characteristics or circumstances of the insured of which the insurer was aware, or ought reasonably to have been aware, are to be taken into account in determining whether an insured has taken reasonable care not to make a misrepresentation.
(5) The insured is not to be taken to have made a misrepresentation merely because the insured:
(6) To avoid doubt, a misrepresentation made fraudulently is made in breach of the duty to take reasonable care not to make a misrepresentation.
…
Division 3—Remedies for relevant failures
27AA Meaning of relevant failure
(1) In this Act, a relevant failure in relation to a contract of insurance is: (a) if the contract is, or would be, a consumer insurance contract—a misrepresentation made by the insured in breach of the duty to take reasonable care not to make a misrepresentation; or
…
28 General insurance
(1) This section applies if a relevant failure occurs in relation to a contract of general insurance but does not apply if the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the failure had not occurred.
(2) If the relevant failure was fraudulent, the insurer may avoid the contract.
(3) If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the relevant failure had not occurred
SECTION 54 Insurer may not refuse to pay claims in certain circumstances
INSURANCE CONTRACTS ACT 1984 - SECTION 54
Insurer may not refuse to pay claims in certain circumstances
(1) Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer's liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of that act.
(2) Subject to the succeeding provisions of this section, where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim.
(3) Where the insured proves that no part of the loss that gave rise to the claim was caused by the act, the insurer may not refuse to pay the claim by reason only of the act.
(4) Where the insured proves that some part of the loss that gave rise to the claim was not caused by the act, the insurer may not refuse to pay the claim, so far as it concerns that part of the loss, by reason only of the act.
(5) Where:
(a) the act was necessary to protect the safety of a person or to preserve property; or
(b) it was not reasonably possible for the insured or other person not to do the act;
the insurer may not refuse to pay the claim by reason only of the act.
(6) A reference in this section to an act includes a reference to:
(a) an omission; and
(b) an act or omission that has the effect of altering the state or condition of the subject - matter of the contract or of allowing the state or condition of that subject - matter to alter.
