AFCA determinations public reporting

Determination

 

Case number

12-00-1052458

Financial firm

Auto & General Services Pty Ltd

 

 

Case number: 12-00-1052458 30 September 2024

  1.             Determination overview
    1.      Complaint

The complainant held a motor vehicle insurance policy with the financial firm (insurer).

The complainant lodged a claim after the insured vehicle was involved in a collision on 28 November 2023. The insurer denied the claim on the basis the complainant failed to disclose that he used the vehicle for deliveries. The insurer says that had he done so, it would not have offered insurance at renewal and would not have continued to cover the vehicle.

The complainant denies making any misrepresentation and says that he inadvertently gave incorrect information when he lodged the claim. He seeks acceptance of the claim.

  1.      Issues and key findings

Is the insurer entitled to deny the claim?

Yes. The vehicle was being used to make deliveries at the time of the loss. The insurer has not established that the complainant breached his duty not to make a misrepresentation at policy renewal. However, the policy does not cover the use of the vehicle in these circumstances.

Why is the outcome fair?

The insurer has established that the vehicle was being used for food deliveries at the time of the loss. This use of the vehicle is not covered under the policy. In the circumstances, it would be unfair to require the insurer to pay the claim.

  1.      Determination

This determination is in favour of the insurer.

The insurer is entitled to deny the claim entirely and is not required to take any further action.

The insurer is to remove from its records any reference to the cancellation of the policy and the decline of the claim based on misrepresentation.

  1.             Reasons for determination
    1.      Is the insurer entitled to decline the claim?

Yes. The vehicle was being used to make deliveries at the time of the loss. The insurer has not established that the complainant breached his duty not to make a misrepresentation at policy renewal. However, the policy does not cover the use of the vehicle in these circumstances.

Summary of issues in dispute

The insurer has provided detailed submissions to AFCA outlining the reasons for its decline. In summary, the insurer declined the complainant’s claim because:

  • the complainant failed to disclose that the vehicle was used for Uber Eats
  • the insurer would not have renewed the policy if the complainant had disclosed this and there has been a breach of the duty not to make a misrepresentation
  • the policy states that use of the vehicle for deliveries is never covered and includes terms requiring an insured to advise of a ‘Change of insurance details during a policy term’
  • the complainant did not contact the insurer prior to the claim being lodged, to advise that he had registered, and begun using the insured vehicle for food delivery
  • if the complainant disclosed the intended use of the vehicle, the insurer would not have continued to offer cover to the complainant.

The complainant says he made a mistake when he lodged the claim, in that he told the insurer he was delivering Uber Eats in his vehicle at the time of loss when he was actually collecting food for personal consumption. 

Complainant’s duty not to make a misrepresentation

There is no dispute that the complainant was also provided with the Product Disclosure Statement (PDS) and Supplementary Product Disclosure Statement (SPDS) for the policy.

The 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 this policy. This is set out in section 20B of the Act. The duty is also set out in the policy documents.

To refuse to pay a claim on this basis, the insurer must be able to at least show: 

  • the complainant made a misrepresentation
  • the complainant did so by failing to take reasonable care – section 20B of the Act 
  • that it has been prejudiced by this failure – section 28 of the Act. 

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.

Complainant answered questions about vehicle use at renewal

The policy was renewed on 15 April 2023. The insurer emailed the complainant a renewal offer with an Insurance Certificate for the period 15 April 2023 to 14 April 2024.

The ‘Insurance Certificate’ records that the complainant was asked the following questions about how the car is used and had answered ‘No’ to both questions:

Will the car be used for carrying passengers for payment (including taxis and/or ridesharing, e.g. Uber), driving tuition for payment, or hiring the car out to other people? No

Will the car be used for making deliveries or carrying other people's goods for payment (whether as a contractor or otherwise)? No

The renewal email, Cover Letter and Insurance Certificate all clearly advise the complainant to check the documents carefully and that this forms an important part of his duty of disclosure. The complainant did not contact the insurer to change his answers.

Complainant was using the vehicle to deliver Uber Eats

The complainant lodged the claim by telephone on 28 November 2023.

During the claim lodgement call the complainant advised the insurer that he was ‘doing Uber Eats and going to deliver my order.’ The insurer recorded the incident description as follows:

I was driving on [Y] Avenue going to deliver uber eats and my phone dropped. While trying to pick it up, I hit the car in front of me. Impact on my car front, bonnet is up and bumper damaged. Impact on the other car rear bumper. After the incident we exchanged details and took pictures of the damages. Both cars drove from the scene. However, don’t feel car is safe to drive.

The insurer’s claim notes also relevantly state:

CUST DISCLOSED THEY WERE USING IV FOR AN UBEREATS DELIVERY WHEN THE INCIDENT OCCURED. CUST ALSO ADV IV IS USED FOR UBEREATS 3-4 DAYS AND STARTED USING IT FOR THIS LAST MONTH.

During a phone call on 7 December 2023, the complainant again told the insurer that he used the insured vehicle (a Ford Falcon) for Uber Eats deliveries and that he registered the vehicle around November.

The complainant has also provided documents regarding his Uber usage including:

  • A screenshot of his Uber profile showing a different vehicle was registered with Uber
  • A screenshot of his Uber profile dating back to 10/9/2023 which states he has completed 20 deliveries and been on Uber since 2020.
  • An email from Uber dated 10 October 2023 which states ‘Congrats… you completed your first delivery’. This email is addressed to the same email address on insurer records.
  • Statement of weekly earnings for October to December which show that he did not generate income on the date of the loss.

The complainant says he made a mistake on the lodgement call, in that he was meant to say he was collecting food for personal consumption, not that he was delivering an Uber order. However, the complainant has said in three different phone calls with the insurer that he was delivering food at the time of the loss. 

I consider the statements made by the complainant nearest to the date of loss, and prior to the decline of claim, to be the most accurate. I am therefore satisfied on the balance of probabilities that the complainant was using the insured vehicle to complete an Uber Eats delivery at the time of the loss (despite it not being registered for use with Uber).

Complainant did not a breach the duty at renewal

To establish a breach of the duty, the insurer must show that the complainant made a misrepresentation before the contract of insurance commenced. The insurer must therefore show that the complainant was using the vehicle for Uber Eats at the time the policy was renewed on 15 April 2023, or that he intended to use it for this purpose.

There is no persuasive evidence to show that the complainant was using the vehicle for Uber deliveries at the time the policy was renewed on 15 April 2023, or that he intended to do so.

The exchanged information shows the complainant completed his first Uber Eats delivery in October 2023, being 5 months after the renewal of the policy and 6 weeks prior to the claim.

This matches information provided by the complainant to the insurer around the time of claim lodgement that he commenced using the vehicle for Uber Eats last month. The fact that the complainant had been registered for Uber since 2020 does not establish he was using the vehicle for deliveries since then (particularly given that another vehicle was listed).

In the circumstances, I am not satisfied the insurer has established the complainant answered the questions incorrectly or made a misrepresentation at the time of policy renewal. I am satisfied the use of the vehicle changed after the renewal of the policy. The insurer therefore has not established an entitlement to decline the claim under section 20B and 28 of the Act.

Insurer says complainant should have notified of change

The insurer has made an alternative argument that:

  • the policy is clear and unambiguous that carrying or delivering other peoples’ goods for payment is never covered under the policy;
  • the complainant did not contact the insurer prior to the claim being lodged, to advise that he had registered, and begun using the insured vehicle for food delivery; and
  • if the complainant disclosed the intended use of the vehicle, the insurer would not have continued to offer cover to the complainant.

The Insurance Certificate states that the vehicle is used for ‘Private and Occasional Business Use’. This is defined on page 6 of the PDS as:

Private and Occasional Business Use is “Private and Commuting Use” above, and also includes occasional business use by the regular driver or their spouse only. Occasional business use means the car is not registered for business use and does not form an essential part of earning an income.

The PDS includes the following term:

Use that is never covered:

…
• carrying or delivering other people’s goods for payment, whether as a contractor or otherwise (e.g. parcel, food delivery)

Page 18 of the PDS includes the following condition under the heading ‘Changing the Policy’:

Change of insurance details during a policy term

You must tell us as soon as possible:
• if there is any change to the car, drivers, use of the car, ownership, or the place where the car is normally kept, and
• if you become aware of any incorrect details on your policy documents.

You must tell us before making any modification to the car and obtain our written agreement.

If your details do change, the premium, excess and terms and conditions of the policy may also change, or we may no longer be able to insure you.

If you do not tell us, we may reduce or refuse to pay a claim or cancel the policy.

The PDS clearly and unambiguously states that carrying or delivering other peoples’ goods for payment is never covered. There is no dispute the complainant was provided with the policy documents and did not advise the insurer of the change of use of the vehicle during the policy term. It is fair for the insurer to rely on the policy terms in assessing the claim.

As above, I am satisfied on the balance of probabilities that the complainant was using the vehicle for food delivery at the time of the collision. This use of the vehicle is not covered under the policy. The insurer is therefore entitled to decline the claim.

Insurer is entitled to decline the claim

Section 54 provides that 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 the level of prejudice sustained or establish the act could reasonably be regarded as being capable of causing or contributing to the loss.

In the context of this dispute, the relevant act was the complainant’s use of the vehicle for food deliveries. The insurer must therefore establish that it suffered prejudice if it seeks to decline the claim based on a breach of that condition.

The insurer has provided an extract of its underwriting guidelines, and a statutory declaration from its Motor Underwriting Manager. These confirm the insurer would not have continued to offer cover to the complainant if it had been aware the vehicle was used for deliveries.

The insurer’s underwriting guidelines effective 9 December 2021 relevantly include a section under the heading ‘Domestic Motor Vehicle Insurance’ which sets out ‘Unacceptable Risks’. This section includes a table titled ‘Use of Vehicle’ which lists ‘Carrying Goods for reward. Taxi-truck, courier work, fast food delivery, mobile shops.’

The statutory declaration relied on by the insurer confirms that:

  • using the vehicle for deliveries is an ‘Unacceptable Risk’ and there is no discretion on this
  • if the complainant had disclosed the vehicle was used for deliveries at renewal, the policy would not have been offered
  • if the insurer becomes aware of ‘Unacceptable Risk’ during the term of the policy the risk details are updated on the system, and it is immediately referred to an underwriter
  • the insurer became aware of the vehicle use at claim lodgement and referred to the policy to its underwriters who confirmed it was ‘Unacceptable’ and no discretion could be applied.

I have already found that the complainant was using the vehicle for food delivery at the time of the collision. I am satisfied that using the vehicle for deliveries was an ‘Unacceptable Risk’ and the insurer would not have covered this use of the vehicle.

The insurer has therefore established prejudice and it is entitled to decline the claim.

  1.      Why is the outcome fair?

The insurer has established that the vehicle was being used for food deliveries at the time of the loss. This use of the vehicle is not covered under the policy. In the circumstances, it would be unfair to require the insurer to pay the claim.

  1.             Supporting information
  1.      The AFCA process

AFCA’s approach is based on fairness

AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:

the legal principles

applicable industry codes or guidance

good industry practice

previous decisions of AFCA or its predecessor schemes (which are not binding).

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.

We assess complaints on available information and circumstances

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:

available documents

the recollections of the parties

all relevant circumstances.

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.

  1.      Relevant legislation

Insurance Contracts Act 1984 (Cth)

Section

Terms

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: 
  1.     the type of consumer insurance contract in question, and its target market 
  2.     explanatory material or publicity produced or authorised by the insurer;  
  3.     how clear, and how specific, any questions by the insurer of the insured were; 
  4.     how clearly the insurer communicated to the insured the importance of answering those questions and the possible consequences of failing to do so;  
  5.     whether or not an agent was acting for the insured; 
  6.       whether the contract was a new contract or was being renewed, extended, varied or reinstated.  
  1.     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. 
    … 

 

27AA – Meaning of relevant failure

  1.     In this Act, a relevant failure in relation to a contract of insurance is: 
  1.     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;

…

28 – General insurance

…

  1.     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.

60 – Cancellation of contracts of general insurance

  1.     Where, in relation to a contract of general insurance:
    …

(b) there was a relevant failure;

…

the insurer may cancel the contract.

 (2) Where:

  1.     a contract of general insurance includes a provision that requires the insured to notify the insurer of a specified act or omission of the insured; or
  2.     the effect of the contract is to authorize the insurer to refuse to pay a claim, either in whole or in part, by reason of an act or omission of the insured or of some other person;

and, after the contract was entered into, such an act or omission has occurred, the insurer may cancel the contract.