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Holden driver wins dispute over undisclosed modification

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The driver of a Holden who failed to tell his insurer about a non-factory-standard cold intake filter in his engine installed prior to his purchase of the car has won a claim dispute after it was damaged during a ‘road rage’ incident.

The Hollard policyholder lodged a claim after the November 2020 event. It was declined on the basis he failed to disclose, or misrepresented, vehicle modifications at policy inception as he did not inform the insurer of the non-standard filter. Hollard said it does not underwrite cars with the non-standard accessory.

The driver told the Australian Financial Complaints Authority (AFCA) the air filter had a manufacturer’s label and Holden Mass Air Flow (MAF) sensor attached, and it looked like a legitimate fitted item.

AFCA said there was no information showing he was aware the insured vehicle had any modifications that were “non-standard or otherwise” and determined Hollard should reinstate the policy and pay the claim.

The insurance Act says where a statement is made that is untrue but is done so under these types of circumstances, it is not a misrepresentation, it said.

“This was his truthful answer,” AFCA’s ombudsman said. "I do not accept insurer has shown that this was not subject to a true belief held with sufficient assurance by the complainant.

"I accept he held a genuine belief the vehicle had not been modified. I also accept a reasonable person in his circumstances would have held the same belief.”

The man’s Initial Purchase Safety Certificate stated the vehicle had no modifications, and he said he relied on this information.

"I was not aware of it being a form of non-compliance... When I see the phrase 'cold air intake', I am assuming a vehicle that is fitted with an intercooler for the purpose of sub ambient air temperature air induction. What was on my car was just an air filter which had the [Holden] attached MAF sensor installed, it looked like a legitimate fitted item,” the Hollard policyholder said.

During the September 2020 policy inception process, the man was asked “Does your car have any modifications?” and examples were listed, including “Cold Air Intake or Sports Air Cleaner”.

The Holden owner answered “no”. Had he answered “yes,” Hollard’s online inception system would have discontinued the quote and stated "we are unable to offer you cover due to your car’s modifications”.

As he did not disclose the vehicle modifications at the time, Hollard incepted the cover and then provided him with a copy of the policy documents by email which stated: “After market and/or optional factory fitted extras: None.”

When Hollard’s accident damage assessor detected the non-standard filter, the man said he was aware the vehicle was fitted with an air intake filter but was not aware it was a modification or non-standard.

"He therefore answered truthfully when asked about this,’ AFCA said. “He answered the question based on a reasonably held belief. He therefore did not breach his obligations at inception. It is fair in these circumstances that the claim be paid.”

AFCA said duty of disclosure requires revealing matters that are "the subject of a true belief held with sufficient assurance to justify the term ‘known’.” For an insurer to show a complainant failed to comply, it must show disclosure was not the subject of a true belief held with sufficient assurance.

There was no suggestion the policyholder had installed the non-standard filter, and AFCA said his purchase certificate gave no reason to believe the vehicle had been modified.

“He says he saw the manufacturer’s label on the part, leading him to believe it was a standard part,” AFCA said. “The complainant admits he was aware the vehicle was fitted with an air cooler. There is no evidence to show he knew this was a modification, let alone a non-standard modification.

“This is crucial to the consideration of whether he failed to disclose or misrepresented his position at inception.”

Hollard said no Holden label was present and provided two photographs of the part in the vehicle but AFCA said although no mark could be seen it did not "mean it was not there” and the absence of a direct mark on the part “does not necessarily mean the complainant should have known it was a modification or a non-standard part".

“I accept the complainant was not aware the vehicle had been modified at the time of incepting the policy. It was not unreasonable for him to have held that belief, given the information presented, therefore I accept the complainant has complied with his duty of disclosure.”

See the full ruling here