non-disclosure, mustang case study

Insurance case study: How non-disclosure can be disastrous

The Insurance Contracts Act 1984 requires that you comply with the duty of disclosure. The Duty entails you to tell your insurer information on certain matters which will help them decide whether to insure you and, if so, on what terms. Not only this, but many policies require clients to notify the insurer in writing of certain changes to the insured risk during the period of insurance. The insurer can then decide whether to cover the new risk. For example, modifications to an insured vehicle that have been undisclosed by the client can leave them in violation of the duty, and therefore uninsured if damage takes place.

Duty of disclosure (or non-disclosure) case study

Unfortunately, this is all too familiar to one woman who recently accidentally damaged her Ford Mustang and lost her bid to claim for the loss due to non-disclosure. The Australian Financial Complaints Authority (AFCA) backed Insurer Allianz’s decision to decline the $14,000 claim since the insured had failed to disclose a modification to the vehicle.

There was no denying that the insured vehicle was accidentally damaged, which would be covered by Allianz, if not for an undisclosed alteration to the car. After lodging a claim seeking $14,000 to repair the car, Allianz soon recognised that the vehicle had been fitted with an aftermarket supercharger, which had not been disclosed.

Because of the modification, Allianz made it clear that it would not have renewed the insurance policy for the vehicle if made aware of the alteration, as it is not aligned with the company’s acceptance criteria. Therefore, a failure to be made aware of the changes meant a breach of the duty, making Allianz not liable to cover the damages made.

For more information on understanding disclosure and your duty to insurance providers, the following link can give further insight. It is extremely important to understand the extent of the duty of disclosure, at each stage of the insurance process, because someone who fails to comply with it could find that they are in fact uninsured when they make a claim, just as this case has shown.

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