The financial services ombudsman has ordered RACT Insurance to accept a car crash claim despite the policyholder’s failure to disclose previous damage to his four-wheel drive.  

When arranging his policy over the phone, the insured had stated the vehicle was in “good shape” aside from scratches.

But after the crash, RACT’s assessor found damage that appeared to pre-date the accident.  

The claimant said the damage – including impacts to panels, bumpers and the tailgate – was from two incidents that happened after the policy was bought.

RACT did not dispute that these incidents caused damage, but it said they did not account for all issues and the man had misrepresented the vehicle’s condition when buying the policy.  

It said had it been aware of the pre-existing damage, it would not have offered coverage.

The Australian Financial Complaints Authority accepts the insured mispresented the vehicle’s condition, noting earlier damage was “more substantial than minor scratches and dents” and “would not ordinarily be considered typical wear and tear through normal use”.  

It says the insurer had asked a “clear” question requiring disclosure of “significant or obvious damage”.

But it finds RACT has not shown it would have refused insurance if the man disclosed the car’s correct condition.  

The insurer’s underwriting guidelines outline automatic denials for cars with “extensive damage” but state vehicles with “some damage” may be acceptable.

The authority says the “disclosable damage seems more akin to ‘some damage’ (a deep scratch and a dent larger than a tennis ball) than ‘extensive damage’ (damage caused when swerving off a road and impacting a tree, damaging multiple panels)”.

It says there is no clear information showing the pre-existing damage was unacceptable.  

See the ruling here.