Insurers seeking to avoid an insurance contract and refuse all claims need to establish misrepresentation is deliberate or reckless to be a qualifying misrepresentation under the Consumer Insurance (Disclosure and Representations) Act 2013.
The importance of establishing the deliberate or reckless nature of the misrepresentation is seen in the recent decision of Lady Paton in the Court of Session case of Southern Rock Insurance Company Limited -v- Hadar Hafeez.
Misrepresentation between an insured and insurer usually takes place at the policy inception or, on occasion, at policy renewal when there is said to be change in the risk. The misrepresentation will, however, not often come to light until a claim is made. The potential consequences of a misrepresentation could involve the insurer collecting an additional premium or, more significantly, the insurer seeking to avoid liability altogether by voiding the policy from its starting point.
The Consumer Insurance (Disclosure and Representations) Act 2013 indicates that with a qualifying misrepresentation, it must however be deliberate or reckless for the insurer to look to avoid the contract and refuse all claims.
The defender, HH, had taken out a motor insurance policy online advising his residence was a street in Giffnock, Glasgow and that his vehicle was kept there.
On 15 January 2016 HH’s vehicle was taken by his younger brother without his knowledge or permission from a street in Govanhill, Glasgow. His brother then had an accident, crashing in to three parked cars, leaving the scene and returning to Govanhill to get help. HH arrived at the accident scene where police officers were in attendance and he explained that his brother had taken the car without his authority or consent and without any insurance. The younger brother ultimately pled guilty to four charges, including taking and driving a vehicle without consent, driving without insurance, careless driving and leaving the scene of an accident.
After the insurance claim was submitted, it came to the attention of the insurer, Southern Rock Insurance Company Limited, the pursuer in the court action, HH did not appear to reside at the Giffnock address given on the policy as the driving licence and V5 vehicle registration document showed the address as the Govanhill address. As a result, the insurers sought to avoid the policy of insurance on the basis of the address misrepresentation and issued a letter setting this out and stating they would not indemnify HH in respect of any claim arising from the incident.
Why was the address important?
The reason for the position taken by the insurers related to the difference in the insurance premium being paid by HH. It was noted that the insurance premium for HH based on the Giffnock address was £1,649.34 but if it had been based on the Govanhill address, the premium would have been £2,899.08.
In court, the pursuer, Southern Rock Insurance, was asking for a declarator in terms of Section 152 (2) of the Road Traffic Act 1988 that it was entitled to avoid the whole policy of insurance.
HH’s defence was that there had been no misrepresentation, and certainly not a “deliberate misrepresentation”.
Evidence was led on behalf of both Southern Rock Insurance and HH.
The documentary evidence provided by the insurers included the V5 vehicle registration document and defender’s driving licence, which both showed the Govanhill address. Additional documentation including bank accounts, council tax, utility bills, wage slips were also for the Govanhill address. This was further supported by a neighbour from that area who gave evidence to suggest that HH lived there.
HH defence was that he still lived at the Giffnock address and evidence was heard from a number of family witnesses supporting that. HH’s brother and sister were living at a rented property at the Govanhill address. HH stated he was in a better position than his brother and sister to satisfy the landlord about credit history and obtained the lease in his name alone. HH maintained he continued living at the Giffnock address although was regularly visiting the Govanhill address every other day.
In terms of sections 2 to 5 of the Consumer Insurance (Disclosure and Representation) Act 2012, the onus was on the pursuer, the insurer in this case, to prove that the defender either deliberately or recklessly misrepresented his address as the Giffnock one ( a “qualifying misrepresentation”). A remedy then is the avoidance of the policy.
The insurer’s case was not successful. Lady Paton held that the contention HH deliberately or recklessly misrepresented the address to his insurers at the time of seeking the insurance could only be established if HH could not, on any view, claim the Giffnock address as his “address”.
In a more nuanced insurance application situation, for example, living between two addresses, the precise wording of the questions to the applicant when the policy was being taken out would be essential in demonstrating that there had been a deliberate or reckless misrepresentation to the insurers.
Significantly in this case the application for insurance was made online. Lady Paton suggested this had both advantages and disadvantages. There was no clear record of the precise wording of the questions which elicited the information from the applicant. There may have been alterations in the wording on the website following on from answers given. The questions in the pro forma online website might not be sufficiently flexible to accommodate non-standard or qualified information which the consumer would have given in, for example, a face to face interview or in a written form which permitted some narrative or explanation from the consumer.
Importantly one of the productions, a printed form headed “Private Car Proposal Form” bearing to contain information supplied by HH when he took out the insurance policy, was shown on evidence not to have been made available to him shortly after the completion of the insurance contract or at any stage thereafter. It appeared the printed form was generated by the insurer, for its own records, solely for the purpose of the present action. Counsel for the insurer, Southern Rock, accepted that the computer website interfaces are changed and updated on a regular basis and there was no evidence vouching the format or content of the website with which the defender interacted.
In the circumstances, Lady Paton found that there could be no categorised deliberate or reckless misrepresentation in respect of the Giffnock address, indicating the possibility of a person being able to live at two addresses and suggesting it may be convenient to then select one address as a post-box.
This decision was undoubtedly disappointing for the insurer, bearing in mind the documentary evidence it put forward to support the proposition that HH did not live at the address disclosed.
It does, however, highlight the burden resting on the insurer in such situations. There are always risks in going through the doors of a court in respect of evidence from witnesses.
This decision does seem to emphasise that online insurance application forms not only need to ask the correct questions, but insurers also have to be able to subsequently prove the exact information captured from the insured at the policy inception.