The Australian Financial Complaints Authority’s (AFCA) decision to rule in favour of a claimant who had breached his duty of disclosure “must be of concern” for insurers, according to law firm Wotton + Kearney.

In that dispute, AFCA did not accept Hollard’s submission that it could decline the complainant’s claim for motor vehicle damage on the grounds of disclosure breaches.

The authority agreed the complainant had failed to disclose his prior claims history but said Hollard failed to prove it would not have issued the comprehensive motor policy had the information been disclosed.

“The decision must be of concern to insurers in terms of assessing where that burden now sits and how they can convince AFCA of their underwriting processes and intention,” Wotton + Kearney Special Counsel Financial Lines Dean Pinto told insuranceNEWS.com.au.

“A balanced and independent assessment of insurance disputes that gives due consideration to the application of the law, including the legal obligations of parties to an insurance contract, are fundamental aspects of the business of insurance.

“The decision raises questions as to whether this will be used as a precedent by AFCA going forward and, if so, the evidentiary burden that an insurer must discharge to satisfy AFCA as to what it would or would not have underwritten had the insured complied with its legal obligations.”

Hollard was contacted by insuranceNEWS.com.au but declined to comment on the AFCA ruling.

The insurer had disputed the AFCA recommendation that was made last year on the case. In the recommendation, AFCA decided the insurance claims history report that Hollard relied on to decline the claim was “lacking in detail”. The report showed the complainant had made five claims in the period prior to taking out the policy with Hollard.