AFCA looks at an insurer denying a claim for non-disclosure of an insured’s criminal record.
The complainant (the Insured) held a car insurance policy with Eric Insurance Limited (the Insurer) and lodged a claim after his car was damaged in a collision on 26 April 2020.
AFCA considered whether the insurer was entitled to deny a claim pursuant to section 21 of the Insurance Contracts Act 1984 (Cth) (the ICA). Section 21 of the ICA provides that before an insurer provides the relevant insurance, an insured has a duty to disclose information including what a reasonable person would be expected to know in the circumstances of the relevant contract of insurance. In this case, the Insurer asked the following question of the Insured as part of the disclosure process:
In the last five years have you or anyone likely to drive/ride the vehicle ever been charged or convicted of a criminal offence, including drug and alcohol related driving offences (DUI)?
The Insured responded ‘No’.
However, the Insured’s criminal history showed that he was charged with ‘possessing dangerous drugs‘ and ‘possessing utensils or pipes‘ on 5 October 2015 and 17 November 2015.
The Insured denied breaching his ICA disclosure obligations on the basis that he believed the question only related to criminal offences that related to driving.
AFCA found that although the question did ask about all criminal offences (not just driving offences) the Insurer could have done more to make this clear (e.g. by separating the relevant categories of offences). AFCA found that the phrasing of the question caused the Insured to assume that the question related to driving offences only, and that this was reasonable given the Insured was obtaining a policy of insurance for his car.
Ultimately, the Insurer failed to establish that the Insured had breached the duty of disclosure as a reasonable person in the Insured’s circumstances could only be expected to have disclosed driving criminal offences. The Insured was not charged or convicted of any driving offences in the five years prior to commencement of the Policy. Therefore, the Insured was found to have complied with the duty of disclosure outlined in section 21 of the ICA.
This is yet another example where AFCA has ruled that it was unfair for an insurer to deny a claim in circumstances where a complainant thought he was only required to disclose information relating to the type of insurance in question.
If you or someone you know have had a claim denied by an insurer, talk to us today!