“7 MILLION WARNED OF INSURANCE TRAP”
Friday, October 30th, 2009
The above headline was taken from the Metro Page 1 - insurance trap article. The Article details the story of Michelle Barber whom Aviva (former Norwich Union) have demanded she pay back the settlement she has received following an arson attack on her home. The reason? – Failure to disclose a £150 fine for a benefits offence she was once convicted of.
Unfortunately the above story is not an uncommon one and it is one we as insurance litigation specialists come across on a daily (yes daily!) basis.
There are 2 main legal arguments insurers like to use to avoid paying you out: 1) Material non-disclosure, 2) Misrepresentation.
1) Material Non – disclosure
Insurance contracts are uberrimae fidae (contracts of utmost good faith). The onus is therefore on you as the insured to disclose all material facts required by the insurer in full. This contrasts with the legal doctrine of caveat emptor (let the buyer beware).
The reason for this policy is quite simple. Insurance is a “contract of speculation” (see Lord Mansfield’s judgement of Carter v Boehm 1766). The Insurer is a business not a charity. They are there to make money. In order so that they can do that they must know their potential exposure to the risk they underwrite. If you are withholding pertinent information, the insurer is misled as to the amount of risk. It is for this reason, material non-disclosure may well mean that your policy will be void ab initio (in valid from the outset) and thus you may find that not only will you not be paid out for your claim, but also lose any premiums you have paid.
2) Misrepresentation
Misrepresentation means: “A false statement of fact made by one party to another, which whilst not being a term of the contract, has the effect of inducing that party into the contract”. Simply put, lying abut something so the other party is more willing to contract with you i.e. lend money/provide insurance etc.
There are three main types of Misrepresentation: Fraudulent misrepresentation, negligent misrepresentation or innocent misrepresentation. A common example of misrepresentation that we come across is when young people or new drivers are attempting to obtain insurance for their shiny new car but find the premiums quoted are ridiculously high. To try and get around this, they say to their insurer that the car actually belongs to their parents and they are merely a “second driver” thus reducing the likely insurance premium.
In effect lying. This, if and when, you ever need to make a claim on your policy or alternatively someone is making a claim on yours, will be held to be misrepresentation.
If this is found to be the case you may find you lose all premiums paid and you lose the protection the policy would have provided you.
What do if your insurer has voided your cover
1) Find out on what basis they have made that decision.
2) Ask them for evidence of the above (i.e. recordings/proposal forms etc). If they refuse to then consider
making a Subject Access Request to force disclosure.
3) Take up the matter though their internal complaints procedure.
4) If the above fails refer the matter to the Insurance Ombudsmen.
5) If the Insurance Ombudsmen does not find in your favour but you still feel you have a claim then please
contact us and we will be happy to speak to you over the phone.
How to make sure your insurance cover is not held invalid
(Applicable to all types of contracts – car/home etc)
1) Tell the truth. If they ask – tell. Do not give Insurance Companies an excuse to invalidate your claim. Be
full and frank and keep a record of all correspondence.
2) Keep your information up to date. If you change address, get points on your licence, have a break in
etc.
Where previous convictions are required to be disclosed you must ensure that you consider the wording of the question carefully. If it says all unspent convictions must be disclosed then you are protected by the Rehabilitation of Offenders Act 1974 and thus only those offences which are not spent need be disclosed. If however, the question states all convictions must be disclosed, we would recommend you write any you may have or obtain clarification from the insurer.
Lawclaim.Net is the marketing division of Hafezis – we have acted for individuals and insurers alike for over a decade and have an in-depth knowledge of how the insurance market works. We are available for Press enquiries.
MP