A car owner will be reimbursed for her losses after winning a claims dispute against her insurer about pre-existing damage. 

The complainant lodged a claim relating to damage to her 2014 Toyota Landcruiser after it was hit by a third-party vehicle.

Suncorp declined to cover the claim, saying that the claimant breached policy conditions by failing to disclose pre-existing damage to the insured vehicle (IV). 

The insurer said the vehicle owner misrepresented information about the car’s condition and that it would not have offered the policy if it had been aware of the damage.

The complainant said that she had not been aware of any issues with the vehicle significant enough to be considered “pre-existing damage”. 

She said the insurer had asked a singular “vague and unspecific” question about whether the IV had any pre-existing damage, to which she responded “no”.

The Australian Financial Complaints Authority (AFCA) observed photographs of the IV, identifying “quite minor and not obvious” damage to the car’s rear panel and bumper bar.

It said that damage to the car’s spare wheel cover had been more noticeable but acknowledged that it was not unreasonable to assume that this damage had no impact on the value, use or function of the IV and would only be considered for optional cover. 

“I am satisfied it is fair to accept the complainant’s opinion that there was no [pre-existing damage] to the IV was reasonable and she answered the question honestly and truthfully,” AFCA said.

“Further, in the absence of compelling information to the contrary, it is reasonable to accept the complainant’s opinion that she didn’t know disclosing the damage to the wheel cover was relevant to the insurer’s decision to offer insurance.”

It also acknowledged that Suncorp representatives had not informed the insured of the importance of providing “truthful and accurate answers” until after it asked the question relating to the pre-existing damage.

“I am not satisfied the insurer fulfilled its obligations to inform the complainant of the general and effect of the duty including the importance of her truthful and accurate answers before asking her the question it seeks to rely on to decline indemnity,” AFCA said.

Suncorp said that it would not have entered the insurance contract without the misrepresentation from the vehicle owner. 

The insurer argued that her failure to comply with her duty to inform was a “relevant failure” under section 27AA of the Insurance Contracts Act (cth) 1984.

It provided AFCA with its underwriting guidelines, which it said delineated a difference between what was considered “wear and tear” and “un-repaired impact damage”.

However, AFCA refuted Suncorp’s argument, saying the IV’s pre-existing condition did not align with its policy definition of “un-repaired impact damage”. 

“I accept the photos show the damage is minor damage and it is fair to accept it is reasonable for someone to consider it to be consistent with wear and tear,” AFCA said.

“Accordingly, even were I to accept the insurer has shown the complainant failed her duty, which I am not, it has not shown it would be entitled to decline cover in line with the underwriting guidelines.”

“The insurer has not provided any information to establish the minor damage in question will have had an impact on the value, use or function of the IV,” AFCA said.

The ruling required the insurer to reinstate the policy and accept the complainant’s claim.

Click here for the ruling.