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Submerged car covered, dealer to blame

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A motorist with a poor driving record whose Toyota Landcruiser became submerged in seawater has won an insurance dispute after the Australian Financial Complaints Authority (AFCA) ruled the car dealer who sold the policy failed to highlight the duty of disclosure.

The Eric Insurance comprehensive policy was taken out through the vehicle dealership when the car was purchased in July 2011.

A claim was lodged the next year after the car was submerged and written off, but the insurer rejected payment as the policyholder had failed to reveal a driving history that included numerous fines and suspensions.

The issue went to AFCA as the driver asserted he was not clearly informed of the duty of disclosure, the agent had failed to provide a qualified interpreter and had also failed to explain the nature of his obligations under the policy.

AFCA says the onus is on the insurer to prove that it clearly informed the man in writing or orally, prior to entering into the contract, of the general nature and effect of the duty of disclosure.

The dealer developed processes to ensure relevant disclosure questions were asked and answered, but AFCA says his statutory declaration does not confirm the questions were asked during the policy inception process or that he clearly provided information on the disclosure duty.

There was also no evidence to show the product disclosure statement and policy schedule, which include the duty, were provided before the man entered into the contract.

Insurer documents related to the policy include a quote provided on July 16, 2011 and a signed certificate of currency with the same date.

A letter sent on July 27 from the underwriting department refers to a PDS and policy schedule being issued through the sales process and asks for the recipient to contact the insurer if that’s not the case.

“It does not establish that the insurer clearly informed the complainant before entering into the contract of the general nature and extent of the duty of disclosure,” AFCA says.

The letter includes several questions and answers “allegedly provided by the complainant”, but AFCA says that it again does not establish that the policyholder was clearly informed of his disclosure duty.

“I accept that the complainant did not provide his relevant driving history,” the AFCA adjudicator says. “However, there is no suggestion that he did so deliberately to deceive the insurer into offering him insurance. There is no suggestion any non-disclosure was fraudulent.”

AFCA says the insurer should cash-settle the claim for the agreed market value for the vehicle at the time of the incident and should pay interest calculated from the claim final rejection date on October 8, 2015.

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