79/11
insurer refuses to pay claim for theft of car because consumer had not disclosed the modifications made to his vehicle
Mr C returned from a short business trip to find his car had been stolen from the side-road where he usually parked it, close to his house. He rang the insurer to report the theft and, while confirming the details, he mentioned that several modifications had been made to the car.
The insurer was not aware that the car had been modified in any way. It told Mr C it would never have offered him
insurance if it had known about the modifications. It declared his policy "void" and rejected his claim. Very unhappy with this outcome, Mr C brought his complaint to us.
complaint upheld
Mr C accepted that he had made a number of changes to his car - but he disputed the insurer's view that these changes amounted to "modifications".
We looked at what the insurer had said about modifications when Mr C applied for his policy. He had completed his application online and we noted that there was a clearly-worded section asking for details of any modifications. Applicants were told to phone the insurer if they were at all unsure about the type of information they were required to provide in this section.
We then checked what Mr C had told the insurer when he reported the theft of his car. The insurer's recording of the call showed that Mr C had not had any difficulty understanding the question when asked if his car had "any modifications". He had responded by detailing all the changes that had been made to his car. We therefore concluded that he had been aware these changes amounted to modifications and that he had failed to disclose them when he applied for his policy.
The insurer argued that Mr C's failure to disclose the modifications was a "material fact"- in other words, something that would influence an underwriter when deciding whether to offer
insurance in a particular case, and the terms and conditions that should apply.
In cases where a consumer "deliberately" or "recklessly" fails to disclose a material fact, the insurer is able to "void" the policy (treat it as if it never existed). But if the non-disclosure was "innocent" or "inadvertent", then the insurer should re-write the
insurance on the terms it would have offered - if it had known all the facts.
When we asked the insurer to provide evidence of the approach it would have adopted, if it had known the full facts in this case, it sent us a copy of its underwriting manual. This indicated that if the insurer had known about the modifications, it would still have offered to cover Mr C, but it would have increased the premium by 75%.
We had found no evidence to suggest that Mr C had acted "deliberately" or "recklessly" in failing to disclose the modifications - and we concluded that his non-disclosure was "inadvertent". The premium he had paid was only a proportion of the full amount he would have paid - if the insurer had known all the facts. So we said the insurer should pay part of Mr C's claim to reflect the proportion of the (correct) premium that he had actually paid.
