A woman who damaged her Ford Mustang when water was “accidentally introduced to the engine rather than the windscreen water reservoir” has lost her bid to claim for the loss – because of non-disclosure.

The Australian Financial Complaints Authority (AFCA) backed Allianz’s decision to decline the $14,000 claim because the insured had failed to disclose a modification to the vehicle.

There was no dispute the complainant’s vehicle was accidentally damaged – a risk insured against – and the owner held a comprehensive motor insurance policy with Allianz, which had been renewed.

But after she lodged a claim seeking $14,000 to repair the car, Allianz became aware the Mustang had been fitted with an aftermarket supercharger which had not been disclosed.

The insurer refunded the premium back to October 2017, when the supercharger was fitted.

Allianz said it would not have renewed the policy if it had been aware of the modification as it fell outside acceptance criteria. Therefore, it would not have been on-risk at the time of the loss occurring.

“There was no dispute the supercharger and associated modifications were made on or around 18 October 2017,” AFCA said. “Therefore, the complainant was required to advise the insurer at that time in the change of risk.

“The complainant failed to disclose the modification at renewal and therefore breached the duty of disclosure. She has failed to comply with her obligations.”

Allianz sent the complainant a hard copy of the inception documents, and “it is not incumbent on the insurer to demonstrate the notices were received or read by the complainant,” AFCA said.

“The insurer is not required to draw the insured’s attention to specific terms; provision of the documents is sufficient.”

Allianz was not required to send a PDS at renewal as the terms of the policy were unchanged.

AFCA said the woman’s failure to disclose the modification was “a simple oversight” and “should be treated as an innocent non-disclosure” but it was “satisfied that had the complainant complied with the duty of disclosure the insurer would not have offered renewal in 2018”.

“Therefore, the insurer is entitled to reduce its liability for the complainant’s claim to nil, as it would not have been on-risk at the time of the loss occurring,” AFCA ruled.

However, the owner was awarded some compensation because of the way the claim was managed.

AFCA said Allianz was entitled to decline the claim, but “the insurer is to pay $1000 compensation for the way it has managed the claim”.

“This claim could have been resolved in a much shorter time with more effective management. I consider the unnecessary time taken to provide the outcome would have caused an undue degree of stress and inconvenience to the complainant.”

Click here to see the full determination.