A homeowner who had his theft claim denied and policy cancelled after he failed to disclose his son’s criminal convictions has lost his dispute to overturn his insurer’s decision. 

The complainant lodged the claim under his home and contents policy following a theft from his property in late July last year.

However, Auto & General declined the claim after it alleged that the policyholder failed to comply with his duty to take reasonable care not to make a misrepresentation by not disclosing information about his son’s criminal history.

The insurer notes that at policy renewal the claimant did not update a previous answer of "no" to a question asking if any household member had been convicted of a criminal offence, despite his son being convicted on six criminal offences relating to drug possession and intent to sell or supply prohibited drugs. 

The complainant acknowledged that his son had “picked mushrooms from a field and received a criminal conviction,” but argues that it should not have had bearing on his theft claim.

The Australian Financial Complaints Authority (AFCA) noted that the insured had correctly answered the question when the policy was initially incepted. However, by the time it was renewed on April 3 last year, his son had been convicted of the crimes.

The man says that his policy had automatically renewed every year and that he did not think his son’s conviction would have been relevant.

AFCA agreed that Auto & General informed the policyholder about the importance of accurately answering the question, or correcting previously given answers at renewal, and the potential implications of a misrepresentation.

“Even if the complainant thought his son had only committed a minor offence or that it was irrelevant to his home insurance, he was required to act honestly and provide accurate information to the insurer at the time of the renewal,” AFCA said.

“There is no doubt the convictions were relevant to the question on the policy documents regarding criminal offences and impacted the complainant’s previous response.

“Therefore, by not correcting the previous declarations, the complainant has made a misrepresentation.”

The insurer argues that it was prejudiced by the claimant’s breach of duty and would have declined to renew his policy, as per its underwriting guidelines relating to “unacceptable risks”, if it had been aware of the relevant information. 

It referred to a statutory declaration from its senior underwriter, which said the policy would have been flagged as “unacceptable” following a review. 

AFCA acknowledged that there was “ambiguity” in Auto & General’s underwriting guidelines that indicated there “may be some discretion in whether or not the risk would be accepted”.

But it determined that this discretion had been limited to circumstances that fell outside of its defined convictions rules and that the insurer was entitled to decline the claim and cancel the policy.

“Based on the above, I am satisfied the insurer has established that it was prejudiced to the extent that it would not have issued the policy renewal if the complainant had disclosed his son’s convictions,” AFCA said.

“On balance, I consider that based on the underwriting guidelines, the whole risk would have been uninsurable.”

Click here for the ruling.