A recent determination published by the Australian Financial Complaints Authority (AFCA) [Determination 1013768 re Auto & General Services Pty Ltd] demonstrates, once again, why honesty is the best policy when consumers are dealing with insurance companies.
Facts
In June 2019, the complainant was convicted of possessing a “commercial quantity of a schedule 1 dangerous drug” and received a good-behaviour bond for 16 months (conviction).
In July 2020, the complainant purchased a comprehensive motor vehicle policy (policy) from Auto & General Services (insurer). He renewed the policy every year from then on.
In July 2023, the complainant’s vehicle (vehicle) was stolen. He lodged a claim on the policy with the insurer (claim).
Insurer's decision
The insurer declined the claim on the basis the complainant did not disclose his conviction and criminal history.
It said the complainant failed to comply with his duty of disclosure and he did not take reasonable care to avoid making a misrepresentation to the insurer.
Complainant’s argument
The complainant said:
- He believed he had a “clean record” when he applied for the policy; and
- He only became aware of the conviction after the insurer declined the claim.
Proof of complainant’s argument
The complainant gave AFCA a copy of an email between his mother and his lawyers (email) in which she recalled the barrister (barrister) telling her the following outside court (conversation), after the conviction was handed down:
- The sentence had been a “good outcome”
- It would not appear on the complainant’s record “as long as … nothing else happens in the meantime”.
As part of the claim investigation, the barrister told AFCA the complainant and his mother may have misinterpreted his words.
AFCA received a copy of the complainant’s National Police Certificate and a court transcript, both of which confirmed the complainant had a conviction recorded.
Insurer’s argument
The insurer submitted to AFCA:
- The complainant had repeated and ample opportunities at policy renewals to correct the information or contact the insurer if the complainant was unsure about the conviction
- The insurer’s question in the policy and renewal documents about criminal history was “clear and unambiguous”
- The barrister’s comments were not provided in a legal capacity, but rather as a recollection of a prior conversation
- If the insurer had been informed about the conviction, it would not have offered the policy to the complainant.
AFCA’s determination
AFCA found the complainant “disclosed what he believed to be the truth, based on his barrister’s advice”.
AFCA took account of the complainant’s youth and absence of previous convictions to rely upon the barrister’s explanation to the complainant and / or his mother of the court’s findings. AFCA found the email supported the complainant’s belief.
Therefore, AFCA concluded the complainant “disclosed what he believed to be the truth, based on his barrister’s advice”.
Take aways for insurance claims and policies
In previous case notes published on our website, we have recommended that consumers always honestly answer questions asked by an insurer – either when purchasing an insurance policy or in the unfortunate event of submitting a claim on an insurance policy.
This AFCA determination confirms the importance of answering honestly.
It is also important to ensure supporting material is retained by consumers. In this instance, despite the barrister’s thoughts about the conversation or its meaning, AFCA found the email supported the complainant’s belief that he was telling the truth.
