The director of an automobile service company has won a dispute after his insurer denied a claim for damage to a vehicle driven by one of his employees.

The complainant, referred to as MR, lodged the claim after the employee crashed one of the company’s vehicles in July last year.

HDI Global Specialty SE declined the claim, saying it would not have issued the “Dealers Pack” insurance policy to the business had it been aware of the employee’s driving history and that the claimant had breached the duty of disclosure.

However, the policyholder challenged the insurer’s decision, says the employee had not been a director of the company, and that their driving information should not be relevant to whether it would accept or deny the claim. 

The insurer then requested MR's driving history, and said it also would not have offered the policy if it had been aware of that. 

HDI Global Specialty SE notes that MR failed to inform it of four separate licence suspensions he accumulated between 2015 and last year despite having been asked to list any suspensions on a proposal form.

The insurer says if it had known, MR would have been flagged for an automatic denial and been referred to its underwriting manager, known as WG. A statutory declaration from WG confirmed that he would have declined to accept the insured’s risk. 

The Australian Financial Complaints Authority (AFCA) accepted that the complainant breached his duty of disclosure by failing to inform of the licence suspensions. It says that as a business policy the duty of disclosure applies, not the duty to take reasonable care not to make a misrepresentation as applies in consumer policies.

However, it raised questions regarding the insurer’s assessment that MR’s non-disclosure would have definitely led to policy denial, saying it would have been “not fatal to the complainant”.

“On the one hand, the insurer claims the complainant would have been an automatic decline,” AFCA said.

“However, on the other hand it says more information would have been sought following the answer to the disclosure question and, then, WG would have used his discretion to decline the risk.”

It notes that HDI Global Specialty SE did not refer to the underwriting guidelines related to “unacceptable risks” to determine that the complainant would not have been offered a policy.

“In sum, the insurer essentially says it applies the underwriting guidelines by leaving the underwriting manager to consider the driving history of a relevant person in an unspecific way,” AFCA said. “However, the lack of clarity in the insurer’s submissions is significant.

“Whilst the complainant did not comply with its duty of disclosure, the outcome is fair in all the circumstances because the insurer has failed to show it would have declined to issue the policy had the complainant disclosed MR’s driving history.”

The decision required the insurer to accept the claim and cover losses relating to the collision, including any applicable towing and vehicle storage costs. 

Click here for the ruling.